Law Commission Bill [HL]
	 — 
	First Reading

A Bill to make provision in relation to the Law Commission.
	The Bill was introduced by Lord Lloyd of Berwick, read a first time and ordered to be printed.

House of Lords (Members' Taxation Status) Bill [HL]

Copy of the Bill

Second Reading

Moved By Lord Oakeshott of Seagrove Bay
	That the Bill be read a second time.

Baroness Royall of Blaisdon: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the House of Lords (Members' Taxation Status) Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Lord Oakeshott of Seagrove Bay: My Lords, Britain is officially in recession. The spectre of deflation looms large. Retail prices have fallen over the past quarter at an annual rate of 10 per cent. Millions of our fellow citizens are struggling to keep their jobs, stay in their homes and pay their taxes, but there are Members of this House who are non-resident or non-domiciled for tax purposes. How on earth can it be right for Peers who avoid paying full British tax to vote, for example, on the Banking Bill as we pour tens of billions of ordinary, hard-working taxpayers' money into the banks? How can any noble Lord in all conscience accept a peerage from the Queen for life and then keep signing tax returns—as you have to do as a non-dom—stating that he does not intend to stay permanently in this country? That is what non-doms do, and it is a disgrace.
	We face the gravest economic crisis since the hungry 1930s. Our fellow citizens deserve moral as well as political leadership from their Parliament, but we are breaking their trust if we sit in this place, vote on their laws, but keep our treasure hidden in some tropical tax haven. Britain is fighting an economic war with its back to the wall. Tax revenues and tax collection will come under terrible strain, so for Peers to wriggle out of paying tax today is like wriggling out of conscription in 1940. My Bill is even more timely and urgent now than when I introduced it with wide-ranging cross-party support in the previous Session. Then, it ran out of time, but I thank all my supporters, many of whom have taken the trouble to be here today to show the flag again. In this Session, the Bill is off to a flying start with the first Second Reading slot for a Private Member's Bill. I thank my noble friend Lord Steel of Aikwood, who was in front of me in the queue, but who is, very sensibly on a grey day like this, cruising off Africa.
	I look forward to hearing all noble Lords who speak today, especially my noble friend Lord Goodhart, who is exceptionally learned and helpful and a great expert on these matters and will particularly cover the question of Peers taking up temporary public appointments abroad under subsection (7). I will also be listening equally to noble Lords who were more sceptical in the previous Session, such as the noble Viscount, Lord Astor, and the noble Lord, Lord Selsdon, who always throws an entertaining and original light on any subject that engages his attention in this House. Remembering the Committee stage last year, I point out that the Bill does not change in any way any Peer's tax status by one iota or even require him to disclose it. All that happens is that Peers will be taxed on the basis that they are fully resident and domiciled in this country for tax purposes, just like the vast majority of our fellow citizens.
	Clause 1 is the key clause. It states that Peers are,
	"deemed to be resident, ordinarily resident and domiciled in the United Kingdom and in no other country for taxation purposes".
	It is drafted like that because it is possible to be partly resident here and partly resident overseas. I have also avoided any need for Peers to make declarations publicly about their tax status or for Her Majesty's Revenue and Customs to reveal any details about current Peers' individual tax affairs to the authorities of the House or anyone else. We have drafted a simple and effective way of getting around that: the list of Peers' names will be sent to the chairman of HMRC once the Bill becomes law and HMRC will be notified three months later of any Peers who have to be taken off the list under the terms of subsection (5) because they have chosen not to be taxed on that basis and have therefore taken leave of absence for life.
	This is a new version of leave of absence, but it is just what it says on the tin: irrevocable. That seemed simpler than disqualifying Peers who do not pay full British tax, but the result is the same, except that they keep their title. In future, the Revenue would make a one-off declaration under subsection (7) that a new Peer is resident and domiciled in the United Kingdom for tax purposes within three months of his appointment. As this represents a change in the law since noble Lords were appointed to this place, it is only fair to give those who are not content to be taxed on that basis a once-and-for-all opportunity to opt out under subsection (2). By taking immediate and irrevocable leave of absence for life, they retain their current status, whatever it may be. What we cannot have is an open-ended rolling opt-out. There is no room for peripatetic parliamentarians who are British life Peers one moment, then Liechtenstein Lords, Monaco millionaires, Cayman Island counts or even Belize barons. Of course, Peers may want to spend time abroad for health or family reasons, but once you have accepted a Peerage from the Queen for life and a seat in Parliament for life, you should pay full British taxes on your income for life.
	Some Peers have argued that that simple change to clean up our act and our image in the country should wait for the second stage of Lords reform. As the House of Commons Public Administration Select Committee pointed out this week in its excellent response to the White Paper on an elected second Chamber, that moment,
	"is some years off even at best".
	The committee, in arguing for a stronger House of Lords Appointments Commission, a view that I very much share, states that,
	"change is needed and possible in advance of any legislation on the future shape of the second chamber".
	The logic is just the same for cleaning out the dark corner of Peers' taxation status. It makes no difference whether you support an appointed or an elected chamber. Anyone who sits in this place and votes on our laws must pay full British tax.

Lord Lea of Crondall: My Lords, I very much welcome the Bill, although it might have been nicer to discuss it on a cruise liner off the coast of Africa—perhaps we could all have been there to hear the noble Lord, Lord Steel, tell us about the merits of his Bill on reform of the House of Lords. I have enough experience of Private Members' Bills, as we all have, to know that this is a chance to air the principle behind it, which is very timely. Some of us will therefore not be addressing the detail this morning.
	The noble Lord, Lord Oakeshott, made an interesting observation at the start of his speech along the lines of, "Here we are now in a recession and we see people in offshore tax havens having a legislative role in the House of Lords". My noble friend Lord Lipsey and I were on opposite sides of a debate last night about who caused the winter of discontent. During the winter of discontent in 1979, 24 million working days were lost. For each increase in unemployment of 1 million in a year, 365 million days are lost. A 2 per cent increase in unemployment, which we have, means more than 600 million days lost. The crisis we are in at the moment is very relevant to the reputation of the whole financial services sector, those people who live in tax havens, and some of the best brains in the City of London who for years have dedicated themselves to defrauding the British public of the tax that they should be paying.
	To complete the analogy, those 24 million days lost in 1979 and all the circumstances that led up to that—there are arguments on both sides—are thought among historians of the intelligentsia to have been the nadir of the trade union movement. I could argue about that but if it is true, a fortiori it is now true a hundredfold about the damage caused by people who are defrauding the country. What are they doing to the economy? These are the greedy people who have looked after their own interests. They have no interest in the rest of society. They have gone from 10 to 20 to 30 to 40 in leverage ratios, in pyramid lending and all the rest of it. It is a scandal that anyone with that status should be legislating in the House of Lords.
	In one sense, I am quite happy that things continue as they are, because that will be a clear signal to many other sections of society, such as people in Burton-on-Trent in a few weeks or a few months' time. Who are they going to blame for what is happening at the moment? They have to blame someone.

Lord Strathclyde: Mr Brown.

Lord Lea of Crondall: They are not going to blame Brown, they are going to blame those greedy people in the City of London. That is what the polls are showing and that is what will happen.

Lord Strathclyde: My Lords, I thank the noble Lord for giving way. Is it not true that the Prime Minister and the Labour Party started this whole story by blaming the American banks? Now they are blaming the British banks. Next they will blame the people. They will never take responsibility for it themselves.

Lord Lea of Crondall: My Lords, I am very glad that the noble Lord asked that question. The City of London is a big part of the globalisation process, which we are blaming. No one is arguing that globalisation is nothing to do with the City of London. It is the noble Lord's friends in the City of London—

Noble Lords: Oh!

Lord Lea of Crondall: My Lords, that will be the thought going through the minds of people in Burton-on-Trent. I am not talking about the noble Lord, Lord Strathclyde, himself but about all the people around him who are not squeaky clean in the party of which he is a senior member. I look forward to debating this further. It is interesting to ask: what is the political profile of our party versus the Conservative Party? Where did they go to school? Where did they get their money? That will quite rightly rub off on their party. I am very pleased that certain friends in the Conservative Party will try to defend where we are. That will be remembered.
	Where are we with international financial reform? The G20 will be held in April in London or hereabouts and it will be attended by President Obama and leading statesmen from around the world. What will be the main item on the agenda? It will be the connection between worldwide regulatory reform of financial institutions on the one hand and what we can do together on fiscal expansion on the other. Regulatory reform has quite a lot to do with tax havens and multinational companies minimising tax—as we know, there are some very important merchant banks in the City of London that do not pay a penny of tax. That scandal will have to be opened up like the proverbial oyster—I believe that it is being opened up. When we met Swiss parliamentarians the other day, albeit in Davos and not off the west coast of Africa, we had very tough talks with them. They are well aware that the Germans, among others, are asking for those items to be put on the agenda. That is why the Swiss want to be invited to the G20 meeting, although they know that they do not have a chance of becoming members.
	The bottom line is that this applies to everybody, regardless of whether you live in the Cayman Islands with friends—we may hear more about the benefits of the Cayman Islands. When we look forward to the G20, it is important to ensure that we give fair-dos to people in their taxation and clarify how to deal with the financial services industry, whose abuse of power is 100 times greater than any other in the previous 50 years.

Lord Selsdon: My Lords, I am rather aghast at the moment. I assumed that the noble Lord, Lord Oakeshott, would not change his spots and that he would probably be naming and shaming many Peers. I had planned to do a Conrad Russell and move a Motion that the noble Lord should be no longer heard. I am now rather disappointed.
	I notice that many on the Liberal Benches were not here for Prayers, when we set aside prejudice and partial affections. We saw a few prejudices just now from the noble Lord, Lord Lea of Crondall, whom I fully admire. I am happy to say that I am slightly older than him. I have been in the House longer than all four Liberal speakers put together—theirs is the new boys' Bench.
	I wonder why the noble Lord, Lord Oakeshott, has advanced this Bill. When he first mentioned some of the problems, I spoke with him and wrote him a friendly letter and we had a glass of wine together. I recall that he announced that he paid a six-figure sum in tax every year, and I wanted to know what it was. Under the Freedom of Information Act, I thought, having seen this Bill, that I would ask HMRC whether it could provide the information. My friend at HMRC said that of course it could not provide or publish such information.
	What are we talking about here? We are talking about the Liberal party wanting to attack the other parties in order to promote themselves.

Noble Lords: Shame!

Lord Selsdon: No, my Lords, not "Shame"; that is the normal behaviour of the Liberal Democrat party.
	I have the great advantage of never having given a penny to any political party and I have never been allowed to vote because my father died rather young, so I am totally independent. Here I come to the principal issues of the Bill. If it is a bit of fun, it is a good bit of fun. There is someone whom the noble Lord, Lord Oakeshott, mentioned last time whom we can mention under the rules here. The noble Lord said that we might, heaven forbid, even have Lord Mandelson of Mischief here. I think that the noble Lord, Lord Mandelson, would rather like that; that was suggested before anybody had contemplated that he would be a Member of this House.
	On a more serious note, I do not want to decimate the Bill, but I thought that the answer was that I should add a whole range of new clauses. The first problem is Clause 1, which just does not work. I have raised that before and put it in writing. It involves the question of residency. Residency in the United Kingdom means that you must now—the law has been changed—be here for no more than 91 nights. However, you can be resident in several countries at the same time; other countries have their own tax regulations. The problem is that that is not a clear-cut issue.
	Then we come to ordinary residency. If you have lived and worked abroad for a period and you come back to the United Kingdom, you are immediately resident if you are here for more than a certain period. You do not have to be deemed to be resident; you are effectively resident for tax purposes. Ordinary residency means that if you have been away for a period, it takes four years to become an ordinary resident. You are not an ordinary resident immediately. That causes some concern.
	I have raised the question of domicility before and I have looked at it again at some length. I am not an expert on this, but in my life in international banking everybody wants to mitigate tax when there are transactions. The noble Lord, Lord Oakeshott, will have found that in his investment business. You seek to find the best opportunity if you are buying or selling businesses or investing to get tax clawbacks, government grants or capital allowances.
	Taxation is a weapon of trade. I remind noble Lords that I am president of the Anglo-Swiss Society. We found in discussions with the Swiss that we wanted to co-operate on taxation. You wish to attract people to a tax-friendly—but not tax-free—environment. Our legal and accountancy systems in the UK are perhaps the most trusted in the world; that is a plus. People would like to be here for that reason, but not necessarily for that reason alone.
	Domicility raises an interesting scenario. At birth, you take the domicile of your father. You therefore have that domicile for life or until you wish to change it, which you can do at the age of 16. When you change your domicile of origin, as it is called, you have to do certain things. You must cut off all links with your former country, you must resign from your clubs and sell all your assets, and you must do that, effectively, for life.
	In your Lordships' House and in many parts of this country, there are people who have come in from abroad who had foreign domicility to begin with. Why should they be penalised for such activities? Under the new rules, someone has introduced the horrendous phrase "non-doms". Some people thought that that meant that we were getting rid of domestic servants. We have to accept that if you have been in the United Kingdom for 17 out of the past 20 years, under the new regulation you will be deemed to be domiciled. However, you have the problem of your domicility in other countries, which can cause concern not just in relation to taxation but in all sorts of human relationships. If you change your domicile and become domiciled here or are forced to be domiciled here, you effectively cut off your ties with your mother country. At any time, you have the right, under current law, to resile that domicility of choice and go back to your original country. I am a Scot and if we split up, I would be domiciled in Scotland, where I have a pretty serious opportunity. If you also have a place to bury yourself, as the noble Lord, Lord Desai, made clear at Second Reading, you are domiciled where that is. In Scotland, that is call a lair certificate—you receive a letter when you reach 50, which is the age at which you are expected to die, saying that the authorities hand that over to you. Normally a Scot has paid for the plot a long time ago and paid a maintenance fee for life, so you cannot be got at by the vicar to pay an extra amount. This means that you have a territory.
	Just before this debate I went to the first floor to get advice on your Lordships. If a noble Lord takes a title and becomes an "of", does he have a territory that could be related to having a grave? He has a designated territory. Let us take the noble Lord, Lord Oakeshott, who is "of Seagrove Bay". After his title, the record states "of Seagrove Bay, of Seagrove Bay in the County of the Isle of Wight". The comma is very important. Therefore, he has a territory, which, if I were standing in the European Court of Human Rights, would mean that he is domiciled in Seagrove Bay. It is a question of where the comma comes. Commas are very important. In some countries a comma means a full stop, particularly for money.
	This whole domicile business is extremely worrying. I assume that the noble Lord, Lord Oakeshott, is putting this Bill forward purely for political reasons; but within it are some interesting points, which is why I should like to extend it. I believe that anyone in this country who is in Parliament or who is elected, who holds a public appointment or a job for which they are paid, should have that fully disclosed and have it disclosed that tax is paid on that. Over the years, I have asked Questions on whether the Government—not this one—would provide a list of what public appointments are held by Members of Parliament and what is their remuneration. Most people thought that that was a political issue. I wanted to demonstrate that the breadth of knowledge of your Lordships' House was even greater because of the external appointments that Members held; but people are so concerned about party political sniping that it becomes worrying.
	On a previous Bill, when I banged on ad nauseam at Second Reading, which was an unpleasant experience for me because I do not like doing that sort of thing, I drew attention to the problems that would come to the economy when international confidence went. I forecasted that the pound would go down and that foreigners would leave. A significant proportion in the fall in the value of sterling is because of that. People do not have confidence anymore that the United Kingdom is a stable place in which to live and work from a tax and other points of view.
	I welcome the noble Lord, Lord Oakeshott, for having shown the clemency and understanding that he would not name and shame people. But also he should know that within your Lordships' House there may be, because of people who have come from the Commonwealth and elsewhere, many more foreign domiciles who would like to remain as such. As Her Majesty is Queen of many Commonwealth countries, we cannot look at this issue in isolation. We may come to the view that if people cannot become Members of this House because they are foreign nationals they may change their nationality. Does that forbid them from being Members? It is a complex issue, which is worthy of debate. I have enjoyed, so far, the prejudice of the noble Lord, Lord Lea, and I am sure that we will have prejudice later.
	Perhaps I may point out that my noble friends Lord Trefgarne and Lord Astor, and I, together have more years of service than all those sitting on the Liberal Benches today. My noble friend Lord Trefgarne is younger than me but has been here longer. I hope that the wisdom of my colleagues will prevail and that the Liberal party sitting there with some three-line Whip on "Thank God it's Friday"—

Lord McNally: My Lords—

Lord Selsdon: I might point out, my Lords, that a Private Member's Bill in your Lordships' House costs £100,000 if the normal charges of lawyers, accountants and others are added up, which is a lot of money. We are spending two hours in this Chamber and, after adding all that up, the cost to the taxpayer of the fees that will be charged by the Liberal party is proportionately greater than they deserve.

Lord McNally: My Lords, if the noble Lord looks at the records, he will find that the record of voting by the Liberal Democrats on all days far outstrips that of the Conservative Party.

Lord Selsdon: My Lords, I have great support for the Liberal Democrats, but I do not support this particular issue. I have found them very co-operative and I have many friends among them, particularly from some of the smaller countries.

Lord Goodhart: My Lords, I have resisted with some reluctance the temptation to move a resolution that the noble Lord, Lord Selsdon, be no longer heard. I may come back to that if, when we get to Committee stage, he speaks for as long as he did on the previous occasion. Since the end of 1999, when the House of Lords Act came into force, all Members of your Lordships' House have been here by choice, either by accepting a life peerage, by standing for election as an elected hereditary Peer or by accepting an appointment, such as that of a Law Lord or a Bishop, which carries with it the right to sit as a Member of your Lordships' House.
	Life peerages are no longer awarded, at least in principle, as honours for past services. They are awarded, or should be, in the expectation that the donee of the peerage will play his or her proper part as a Member of your Lordships' House. Membership of the legislature or one of the Houses of the legislature should involve personal commitment to this country. For Members of your Lordships' House, that commitment should include willingness to be liable to pay taxes on the same basis as the great majority of citizens of this country and the great majority of Members of your Lordships' House who are resident, ordinarily resident and domiciled in the United Kingdom. Those who limit their time in the United Kingdom to 90 or 91 days a year to preserve their non-resident status will be insufficiently frequent in attendance and insufficiently in touch with what is happening in this country to justify their membership of your Lordships' House.
	As I explained in the Committee stage of the predecessor of this Bill, I was a "non-dom" until 1968. Non-doms are in a very favourable position because, even if they are resident in the United Kingdom, they are taxable only on income from a source in the United Kingdom or that is remitted from abroad to the United Kingdom. There is no tax on capital remittances, so it is easy for someone who is non-domiciled to avoid a great proportion of income tax by ensuring that, even if they are living a high life in this country, they are doing that out of capital remittances. Domicile is a complicated issue. Broadly, you are domiciled in the United Kingdom if that was your domicile of origin and you have not taken up permanent residence in another country or if you have a domicile of origin elsewhere and have taken up permanent residence in the United Kingdom.
	The question of whether residence anywhere is to be regarded as permanent is notably subjective because it depends not on the present position but on an individual's intentions. An individual may be able to say, "Oh, I do not intend to live permanently in the United Kingdom", knowing perfectly well that in all probability he or she will. Those who have surrendered domicile in the United Kingdom, or who are resident in the UK as non-doms, because they have not committed themselves to personal residence, do not have sufficient commitment to the United Kingdom to justify membership of your Lordships' House. I suspect that very few Members of your Lordships' House are not resident and domiciled in the United Kingdom and that they pay their tax accordingly. But those Members who are non-resident or non-domiciled include some people—I will not name any names—of great wealth who have accepted the prestige of a title, without accepting the liability to pay United Kingdom taxes or any obligation to attend your Lordships' House. They have no intention of taking an active part here when they accept their peerage. They should not be among us.
	This is a good Bill, which may benefit from some amendment. In the debates on the predecessor Bill in the last Session I moved an amendment to exempt people who have undertaken temporary public service abroad. That would include the notable cases of my noble friend Lord Ashdown who, so to speak, was the Viceroy of Bosnia-Herzegovina, and the noble Lord, Lord Robertson, when he was Secretary-General of NATO. It seems perfectly fair that people who are non-resident because they are performing an important public service should be exempt from the Bill. But these are only minor improvements that would affect a small number of people.
	This is a good Bill, and whether or not it is likely to get through the other place, I hope very much that your Lordships will see fit to give it a passage through this House.

Lord Selsdon: My Lords, trying to correct someone of such eminence is very shaming for me, but I should say that the rule is 91 nights in this country, not 91 days. It is an important point because people reading these proceedings may feel that the noble Lord is misinformed.

Lord Goodhart: My Lords, I am most grateful to the noble Lord for his correction of my mistake.

Baroness Gardner of Parkes: My Lords, as a non-domicile, I must correct many of the statements the noble Lord, Lord Goodhart, has just made. If you have lived in this country for more than a certain number of years, you are classified as "ordinarily resident" here, but to lose your domicile of origin is far from simple. His comments about the basis for taxation, particularly in terms of income, are quite wrong. The remittance basis was cancelled by the Treasury from April 2008, and now people pay tax on a worldwide income of £30,000, or whichever is greater, whether or not they remit their money.

Lord Goodhart: My Lords, the noble Baroness is broadly right but as I understand it, the £30,000 basis is an option that a non-dom can choose whether or not their actual remittance of income is higher than that.

Viscount Astor: My Lords, politics, rather like the weather, has seasons; spring, summer, autumn and winter. But politics has another season that usually comes around in August and is known as the silly season. One of the joys of the Lib Dems is that they always get there first. Normally, they get there in March or April when they come up with Private Members' Bills, but this year they have beaten their own record, because the noble Lord, Lord Oakeshott, has brought forward the first Bill of the silly season in January. That must be a huge record for them and we must congratulate them.
	But, really, this is a rubbish Bill. It takes no account of any of the reservations that were expressed during Second Reading or in Committee on the previous Bill. The noble Lord, Lord Goodhart, said that he moved, he thought, Amendment 3 to the previous Bill. But although the noble Lord, Lord Oakeshott, has had a number of months in which to include that amendment, which affects people working abroad for charities, for NATO or whatever, he has not done so—he has made no changes to his Bill. He has not listen to any of the debates, not even to his noble friend Lord Goodhart, because he should have made those changes.
	Between the last occasion on which we debated the Bill and this, the Government have published their proposals in a White Paper. The foreword states clearly that there will be no changes to this House until after the next election. They also made some interesting remarks that are worth quoting about nationality requirements and taxation. Page 63 of the White Paper states that:
	"The Government proposes that in the absence of any other changes to nationality requirements for membership of the legislature, British citizens and qualifying citizens of the Commonwealth (including citizens of British Overseas Territories) and citizens of the Republic of Ireland would be eligible for membership of a reformed second chamber".
	I presume that the Lib Dems signed up to this; certainly no one has said that they do not agree with it. If that is the case, the Government are saying that there could be Members of this House who are domiciled abroad in, say, the British Overseas Territories.

Lord Goodhart: My Lords, I thank the noble Viscount for giving way. Nothing in this Bill says that such people cannot be Members of the House. There is simply an obligation to pay taxes on the basis that they are resident and domiciled in this country.

Viscount Astor: My Lords, the noble Lord has again proved that he does not really understand the difference between "resident" and "domiciled". Although people may easily be able to change their residence and pay tax here, they may not be able to change their domicile—you cannot just go and change it. Indeed, if they are citizens of a British Overseas Territory—

Lord Goodhart: My Lords, I think that the noble Viscount has not understood what I said, although I thought that it was perfectly clear. Someone who is domiciled in, let us say, Ireland, and who becomes a Member of this House, would not be disqualified from being a Member and would not have to change their domicile. It is simply that they will be taxed on the same basis as they would have been taxed if they had in fact been domiciled here.

Viscount Astor: My Lords, that makes absolutely no sense because you cannot be taxed on a basis that you are not a part of. The Government's report talks about British Overseas Territories.

Lord Oakeshott of Seagrove Bay: My Lords, in all honesty, I can only assume that the noble Viscount is wilfully misunderstanding the point. In my speech, I took the trouble particularly to refer to him and to the noble Lord, Lord Selsdon, because the same misunderstanding arose last time. Of course you can be taxed on that basis if the Bill is passed. It provides that someone will pay tax on the full British basis whatever their status actually is. I should have thought that that was crystal clear.

Viscount Astor: My Lords, the noble Lord did say in his speech that it was on the basis, but of course his Bill contradicts him. What his Bill says is that it is not on the basis that someone has to be resident and domiciled—it is nothing to do with the basis. The noble Lord cannot have it both ways; it is just not good enough. Indeed, it is the usual Liberal fudge.
	Perhaps I may turn to the next page of the White Paper where it states that the Government,
	"proposes that the creation of a reformed second chamber would include provision disqualifying from membership anyone who is not resident in the UK for tax purposes".
	That is perfectly fair, but it says absolutely nothing about domicile because that is not in the Government's proposals. So far as I can see, no other party has made any objection to that. So the noble Lord says that he wants it on the basis, but that is not what his Bill says. It really is not good enough.
	No changes have been made to this Bill. The noble Lord, Lord Desai, who sadly is not in his place, wanted an amendment to provide that these proposals should not, for life, be irrevocable, but I can see nothing in the Bill to that effect and the noble Lord, Lord Oakeshott, did not mention it. Moreover, one of the weaknesses of the Bill is that we want everyone who is a Member of the Parliament of this country to pay tax, whether here or in another place. The rules for this House should be exactly the same as those for another place. But if we are going to do that, the same provisions should be brought in for the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly so that they are the same for everyone. To select just this House seems bizarre.
	As I say, everyone should pay taxes if they sit in this place. The noble Lord, Lord Goodhart, told us that he is a former non-dom and remarked that no one comes here as a reward for past services. I do not think that that is correct. A number of noble Lords were Members of another place and the reason that they are here is because they were very distinguished Members of Parliament. Yet again, we have heard from the Liberal Benches something that does not make sense.
	This is a silly Bill because it is a half-hearted attempt at reform. It does not take account of all that is happening elsewhere and I really hope that this time it will not go any further.

Lord Lipsey: My Lords, no one should be even faintly surprised that noble Lords opposite are trying to get straight to the Committee stage of this Bill by looking at the detail. Even they would blush at defending the present situation in this House so far as people who do not live or pay tax in this country are concerned. I warmly commend the Bill on its Second Reading, although of course more work does need to be done on the detail. But being an awkward guy, I shall begin by addressing a point on which I profoundly disagree with the noble Lord, Lord Oakeshott, and indeed with my noble friend the Minister, which is the nature and composition of this House. They are believers in a democratically elected House of Lords, and they are entitled to their view. When this Bill was last introduced, that was the morning glory in full flower. Today the proposition of an elected second Chamber is for all practical purposes dead, buried, no more, and has fallen off its perch. We need therefore to look at this Bill from the point of view of what is likely to continue to be an appointed Chamber.

Lord Hunt of Kings Heath: My Lords, perhaps I may inform my noble friend that there are still some true believers.

Lord Lipsey: My Lords, my noble friend is right, there are still true believers—there is no faith so absurd as not to still attract true believers—but the truth of the proposition that I have advanced speaks for itself.
	In all probability we shall continue to be an appointed House, so why then do we need this Bill? We need it as a matter of legitimacy. I do not have any difficulty in saying that an appointed House can have legitimacy as a second Chamber to an elected House within a balanced Parliament. Precisely how that is achieved—how it is appointed and so on—is an important matter, but I have no difficulty with the proposition.
	But the advocates of election have difficulty with that proposition and they try to find examples whereby our legitimacy as a House can be questioned. The fact that people who no longer have, or choose not to have, much or anything to do with this country can pass legislation is indefensible in the way that legislation being effected by people who have expertise and knowledge of this country is defensible. Therefore, by simply buttressing the legitimacy of this House, a Bill such as the one proposed by the noble Lord, Lord Oakeshott, is desirable.
	I am disappointed that the Government have not enthusiastically embraced the Bill, put it through both Houses with full ministerial backing, and backed-up their own rhetoric, public and private, with action. The reason behind that—I have raised this issue in the House before—lies in the fact that there are people in the Government who grew up when Trotskyism was alive and well in this country and who are in an impossible position on the House of Lords. They want to keep this House, with all its absurdities—of which there are some—in place so that the contradictions in its being are emphasised, thereby advancing the case for electoral reform of the House. That is a position which is both indefensible and immoral.
	The simplest answer to the issue came from the Public Administration Committee chaired by Tony Wright—another of those who want to see this House elected—which stated:
	"The introduction of a fully or largely elected second chamber would render the changes we propose obsolete. But that moment is some years off even at best".
	If by common consent of both the reformers and the non-reformers it is, at best, some years off, surely we should do everything we can to get rid of some of the problems that exist with this House. This issue is one problem; the status of the Appointments Commission is another; and the issues covered by the Steel Bill are others. Get those out of the way and then we can get on with a true discussion as to what is the best nature of this House. I am not afraid to have that discussion.
	But to allow to continue these false obstacles to the way the House is, to defend them or to take no action to get rid of them, is both an immoral and indefensible way in which to proceed. I hope therefore that my noble friend the Minister—although I cannot now hope for his conversion to an appointed House—will announce at least that the Government have been converted to making a good House even better.

Lord Teverson: My Lords, not being an expert on taxation, I, too, wish to address the principles of the Bill. It has a number of positive aspects: it is short— only two pages—and it is simple. I read the Bill for the first time when I put my name down to speak and I found that it was clear about what it is trying to achieve. The strong point about the Bill is that it is about the straightforward principle that if you have the privilege to engage in the legislative process of this country then, on the other side, you have obligations and responsibilities. In discussions about the Human Rights Act and so on, we often hear people say, "Never mind rights. What about obligations?". One of the biggest obligations of parliamentarians is to play a full part in civic society, and the most basic obligation is to pay taxation and dues—your membership fee to the nation—for the great privilege of being a part of the legislation process.
	That is the fundamental principle of the Bill, against which all of us would find it difficult to argue. More details may emerge in Committee—I did not attend the last Committee stage of the Bill—but what we are discussing today is the principle of the matter, which is quite clear and unarguable. I would be interested to hear any noble Lord argue against the principle that if you have the privilege of being a part of the legislative process, you should pay your taxation as a citizen. We often refer to there being no taxation without representation, but surely you have an obligation to pay taxation if you make legislation. I have been a Member of this House for a short period of time, as the noble Lord, Lord Selsdon, reminded me; it is a great privilege but has great responsibilities. I am happy to pay my taxes and other Members of your Lordships' House should be as well.
	This is a small but important matter in constitutional change which reinforces the dignity of this House and Parliament. I hope that the Government will see it as a significant part of the constitutional reform programme that they wish to implement more generally and use it as a piece of the jigsaw in that process.

Lord Selsdon: My Lords, I agree with some of the principles the noble Lord has outlined, but they should be applied to everyone in the country who makes legislation—county councillors and so on—which is somewhere around 106,322.

Lord Teverson: My Lords, I agree with the noble Lord. But this House has a responsibility to put its own house in order. I look forward to speaking at the Second Reading of a Bill that does exactly that, should the noble Lord wish to introduce one.

Lord Trefgarne: My Lords, the basic principle is one with which many noble Lords will agree. I say to the noble Lord, Lord Oakeshott, that there are respectable arguments in the other direction. I shall not attempt to deploy them because I am not sure that I have them at my fingertips and I am more concerned with a range of difficulties which emerge from the Bill. But they are for consideration at the Committee stage, not today, and I will resist the temptation to recite some of the difficulties which occurred to me the last time the noble Lord introduced this Bill. I may well wish to return to them again in Committee if the Bill receives a Second Reading.
	The other principle that has been deployed is that we are reflecting as a Parliament and as a nation upon the future composition and role of this House. As has been mentioned, a White Paper was issued by the Government some months ago anticipating that we should move forward in an agreed manner on the question of House of Lords reform when that agreement can be reached. I fear that it has not yet been reached and certainly the Government are not intending to make further legislative proposals on this matter within this Parliament. If a different Government are in office in the next Parliament, I dare say this issue will not be top of their agenda, so we are not facing an early prospect of Lords reform.
	The Bill suffers from the same defect as similar Bills in the past and, for that matter, the Bill that went through Parliament in 1999. They were a piecemeal attempt at reform of your Lordships' House, and incomprehensive reform at that, that included some of the provisions in this Bill.
	It is therefore inappropriate for the Bill to be considered at this moment. It did not find favour when the noble Lord introduced this Bill in the previous Session, and it is now only a few months on from that consideration. I hope that he will not press his Bill through this House if he gets a Second Reading today. If the Bill goes to Committee, I, and, I dare say, others, will want to table amendments to it. I shall certainly do so, as I think will my noble friend Lord Selsdon and other noble Lords—even the noble Lord, Lord Goodhart, who has already identified some of the shortcomings of the Bill, speaking, as he does, with some expertise in these matters and from the Liberal Democrat Benches.
	I promise the noble Lord, Lord Oakeshott, that the Committee stage will not be quick. We will need to consider the Bill very carefully. In the mean time, I look forward to seeing what happens to it at Second Reading.

Lord Wallace of Saltaire: My Lords, this is a serious issue. It concerns the reputation of this House, and of the Conservative Party in particular. I presume that that is why the noble Lord, Lord Strathclyde, is here on a Friday. I welcome him; we have missed him here in recent days, and I hope he has not been ill. I look forward to him expanding on the intervention he made at the beginning of this debate when he said that we needed to talk about taking responsibility. That is what the Bill is about: Members of this House taking responsibility. If I may turn around the phrase from the American revolution, "No taxation without representation", in the British Parliament there should be no participation in legislation without taxation. We do not want Members of either House of Parliament who are tax evaders.
	We have heard, if I may say so, one or two flippant speeches. It is clear that the noble Lord, Lord Selsdon, intends, so far as possible, to wreck the Bill in Committee. I entirely failed to follow much of his argument. He seemed to suggest at one point that the length of time one has served in this House is completely correlated with the degree of wisdom one has. I am not entirely sure that what I have observed in my nearly 14 years' membership of this House bears out that suggestion. The reason I did not stand up immediately when the noble Lord, Lord Trefgarne, finished his speech is that I was totting up the number of years that I and my noble friends Lord Falkland and Lord McNally have spent here, and although it does not quite approach the total of the noble Lord, Lord Selsdon, it is quite close. That, among many of his arguments, seems to be rather unclear.
	I was interested to hear a declaration from someone with a background in international banking who takes the Conservative Whip that they have never given a penny to any political party. I trust that the Conservative Whip will be in touch with them shortly. I assure the noble Lord that on these Benches someone who took the Liberal Democrat Whip who had not given a penny to that party would be in serious trouble very quickly.
	On the previous occasion when we debated the Bill, the noble Viscount, Lord Astor, confused Luxembourg with Liechtenstein. This time I think I heard the noble Lord, Lord Selsdon, tell us that Selsdon was in Scotland. Perhaps there is another Selsdon, in Scotland, that I have missed.

Lord Selsdon: My Lords, I have a problem: I am a Scottish Baron with an English barony registered in Scotland and a baronetcy. I might buy the noble Lord a drink later and we could have an exchange.

Lord Wallace of Saltaire: My Lords, the Bill is about Members of this House taking responsibility as legislators in the UK to pay tax in this county. We have to recognise that the reputation of politicians in the United Kingdom at the moment is low. The mess we had this week over the Government's attempt to push through the members' expenses order is the latest example of own goals with regard to our reputation. On Wednesday the noble Lord, Lord Bassam, said he was withdrawing the order in the hope that the Government would manage to re-establish a cross-party consensus. There never was one. There may have been a comfortable two-party consensus between those on the Labour Benches who had something to hide and those on the Conservative Benches who had something to hide, but we were never consulted and certainly never agreed.
	As we enter a recession, we recognise the degree of public anger at the denial by the financial elite in Britain, the United States, France, Germany and elsewhere of any responsibility to their wider national societies—certainly not in paying tax. I well remember Leona Helmsley's dictum in a previous recession that, "Only the little people pay taxes". That is one of the problems we are up against, and it is something that my party will be campaigning on in the next few months; we need fair taxation, and everyone should pay tax.
	There are severe dangers to the Conservative Party, and I am sure the noble Lord, Lord Strathclyde, is aware of them, in allowing itself to be identified with fat cats and tax evaders. We know, without mentioning names, that there are those appointed to the Conservative Benches who made promises on appointment that have not been fulfilled, one or two whose status is in need of clarification and has not been clarified, and we know that some of those people are among the largest donors to the party. So there are issues—and I agree with the noble Lord that we need to take responsibility—of disciplinary measures within the Conservative group.
	The issue is about the reputation of this House and, as the noble Lord, Lord Lipsey, said, about interim measures that we need to take, recognising that, whatever the final shape of this House may be, we are going to be stuck with its current composition for some time. Perhaps other measures will come through on an interim basis, but this is one that I suggest needs to be considered seriously. The Conservatives will do themselves great damage if they attempt to treat this flippantly or sarcastically and suggest that the evasion of tax is not a serious problem.

Lord Trefgarne: My Lords, the noble Lord has made a number of remarks about the Conservative Party generally. Is he absolutely certain that every single member of the Liberal Democrat Party is above reproach in these matters?

Lord Wallace of Saltaire: Of course not, my Lords, and we shall do our best to sort that out—as I am sure the noble Lord, Lord Strathclyde, will do.

Lord Strathclyde: My Lords, I am glad to hear that the noble Lord, Lord Wallace, takes these matters so seriously. Once again today the Liberal Democrats have raised the salience of Lords reform. I remind noble Lords that this is one of my favourite subjects; I have spoken on this subject probably more than any other Member currently, and I am looking forward to continuing to do so. We have not had an opportunity for quite some time, so it is tremendous to be able to dust down the old files and make another speech on the subject.
	When the noble Lord, Lord Oakeshott, started, I thought he was going to make a rather more interesting point about the state of the economy, taxation, debt and trying to make this country a more attractive place for people and businesses to come and base themselves here—an issue that really would have an impact beyond this House. Sadly, I was disappointed. Many will have no quarrel with this Groundhog Day. The noble Lord should be under no illusions that if he starts to legislate to exclude certain Peers from this House, some will question why others should sit here at all.
	The noble Lord, Lord Lipsey, talked about the absurdities of this House. The noble Lord was quoted in the Times some years ago saying, "You couldn't elect better Lords than me", so perhaps that is an absurdity we should start off with.

Lord Lipsey: My Lords, I was not quoted as saying any such thing in the Times. They put that headline on my piece. If the noble Lord reads the rest of it, he will find that I could stick to every single word of it.

Lord Strathclyde: My Lords, I am glad that the noble Lord has put that right and I hope that he will now start to support an elected Senate.
	If the noble Lord, Lord Oakeshott, starts to probe into the personal finances of individual noble Lords as he wants, others will no doubt probe how it is that his party has utterly refused to pay back £2.5 million obtained from a convicted fraudster. Only the little people have to pay money back, is that not right? Perhaps we should look for legislation to stop people whose party goes on benefiting from such donations making our laws. Perhaps the noble Lord himself might start drafting it, with the help of his noble friend Lord Wallace of Saltaire. The reputation of his party is at stake. Perhaps he might wish to make a statement as to whether it is planning to repay that money.
	The noble Lord, Lord Oakeshott, is getting a reputation for shouting the odds about this House outside it in ways that do not always reflect accurately on it. Last weekend, he was offering a rent-a-quote comment on the voting records of some of his colleagues—the noble Lord, Lord McNally, might be interested in this—so I thought that I would look up that of the noble Lord, Lord Oakeshott. He was equal 51st in the table of Lib Dem voters in the previous Session. That puts him struggling to avoid relegation from the Lib Dem third division to the fourth.
	Last year, the noble Lord brought this self same Bill to the House. It did not find favour. It was extensively debated. Suggestions were made, even by its critics, to improve it, but has the noble Lord listened? Has he had any discussions with anybody? Has he made any changes whatever to this legislation? Perhaps he has had private discussions with the Government about the Bill. No, he has not. We have to question why the noble Lord believes that he has the right to bring before the House the same Bill which failed last year and the year before in exactly the same way, rather than listening more considerately to those who have criticised it.
	It is a game that the noble Lord and his friends play in debating this issue to pretend that those who oppose the Bill oppose the underlying principles of it. I therefore make it clear, as I did last year, that I and my party believe that if you make UK law in either House—it is a flaw of the Bill that it deals only with one House—you should pay UK tax.
	Whether it should be only UK tax is a different matter. I am not a tax expert, nor is the noble Lord, Lord Oakeshott—even the noble Lord, Lord Goodhart, accepted that it is a deeply complex matter. Many technical issues will need to be addressed if the Bill is to be progressed. Some of them were thrown up by my noble friend Lord Selsdon. I am grateful particularly for the interjection of my noble friend Lady Gardner of Parkes. As I asked last year, what about those who do jobs for the United Nations, the EU or other organisations? Can the noble Lord give the House an assurance that Mr Clegg paid full UK tax on all his EU earnings, from which he will draw a pension? What of businesspeople in mid-career who take contracts abroad? What about gifted businesspeople such as the noble Lord, Lord Paul, who is widely respected in this House and who came to this country to create jobs but may not always be domiciled here? And what, indeed, about the old Liberal Democrat ideal that this country and this House should be open to people born in the new Commonwealth or in other countries? We have Members in this House who are not UK citizens. Should they go? The noble Lord, Lord Goodhart, said that Members of this House should be so committed to this country that they should pay all their taxes here, but does he think that they should also revoke any other nationalities and become United Kingdom citizens and, if so, will the noble Lord accept an amendment to that effect?
	I also disagree with giving HMRC any authority over Members of this House. This House's membership and who sits here is a matter for the Committee for Privileges of your Lordships' House. Since when does the Customs man have any say on who sits in a sovereign Parliament? If there is any system, it should be managed by the Clerk of the Parliaments. I totally disagree with the draconian idea of a life ban as proposed by the noble Lord, Lord Oakeshott, in Clause 1(3). I doubt that it is even in conformity with human rights principles. We should perhaps hear from the noble Lord, Lord Lester of Herne Hill, on that subject in Committee. Even murderers get out in seven to 10 years.
	These and many other issues will need scrutiny in Committee. But what should happen next? This is the third or fourth occasion on which we have had a very similar Bill before us. I doubt very much that it will pass this House. If it does, I understand that the Government will not support it in the House of Commons. Would it not be better if we left all this for proper, well thought-through government legislation on reform not just of this aspect of the House but of so many others, so that we could carry on dealing with the serious issues that face our nation?

Lord Hunt of Kings Heath: My Lords, I say first to the noble Lord, Lord Oakeshott, that, like the noble Lord, Lord Strathclyde, I have been suffering some withdrawal symptoms, since I think that we have to go back as far as last March to find ourselves last being able to debate a subject of keen interest to a number of us; namely, reform of your Lordships' House. I think that we can now look forward to spending many happy Fridays in your Lordships' House debating these matters, as well as, no doubt, the Bill of the noble Lord, Lord Steel, when he eventually returns from his cruise.
	This is not the first time that we have debated this matter. Indeed, this morning we have been treated to a fascinating debate. My noble friend Lord Lea gave a very stirring speech, and the analysis of the noble Lord, Lord Selsdon, of the Liberal Democrats as a collection of new boys was certainly interesting. As I fast approach receipt of my bus pass, I rather enjoyed his description.
	When the noble Lord, Lord Oakeshott, introduced a very similar Bill on this matter in March last year, he set out a simple principle, that,
	"if you pass laws for British people, you pay taxes like British people".—[Official Report, 14/3/08; col. 1711.]
	That has been summed up very simply as no representation without taxation—the noble Lord, Lord Wallace, repeated that.
	The Government cannot and would not wish to argue with that principle. I support what the noble Lord, Lord Goodhart, said about the commitment of Members to your Lordships' House. Paying taxes is an important way in which Members of both Houses of this Parliament demonstrate a commitment to the country that they serve through their parliamentary work.
	As is customary, the Government do not seek to impede the progress of a Private Member's Bill through your Lordships' House, but, equally, it would be useful if I set out some of their reservations about the details of its provisions. The Government are fully entitled to bring to the House those reservations and to ask that the Bill be given extensive scrutiny, without in any way detracting from our support of the no-representation-without-taxation principle. A number of noble Lords kindly mentioned the well ordered White Paper on reform of your Lordships' House which was published last summer. It was informed by the extensive on those matters.
	Let me come to some of the details of the Bill. The noble Lords, Lord Goodhart and Lord Selsdon, as well as the noble Baroness, Lady Gardner, illustrated the complexity of matters around domicile status. I remind noble Lords of a commitment that the Government made in last year's Budget, which undertook not to substantially revise or revisit rules on residence and domicile in this Parliament and the next. We stand by that commitment; the Budget's measures on residence and domicile strike the right balance between helping to maintain the competitiveness of the UK economy and providing a tax system in which everyone pays their fair share.
	A number of noble Lords have commented on the financial challenge facing this country; I should have thought that the stability and balance to which I have referred was ever more important in those circumstances. The stability that we have committed to in rules governing domicile help the UK, and will continue to help the UK, to be an attractive destination for talent and investment in our economy.
	A number of technical points were raised, and it is with some trepidation that I provide the House with information, although it is appropriate that I do so. On the £30,000 charge for access to remittance basis, my understanding is that non-domiciles are not forced to access the remittance basis; it is their choice whether to apply for access to that tax status. Non-domiciles who access the remittance basis for more than seven out of the last 10 years must then pay £30,000 to continue to access the remittance basis or move on to the arising basis. These provisions and others in the 2008 Budget statement strike the right balance between asking non-domiciles to pay a fairer share as they stay in the UK for longer and maintaining the UK economy as an attractive place to invest.

Lord Goodhart: My Lords, does the Minister agree that the £30,000 would be chicken feed for some of the very rich people who spend a lot of time in this country but are non-domicile?

Lord Hunt of Kings Heath: My Lords, as I have said, we think that the £30,000 annual charge is a reasonable basis on which to achieve the kind of balance that I have just described. I shall come on to the definition of domicile. I have to say to the noble Lord, Lord Selsdon, that the 17 out of 20 years rule applies only to inheritance tax, because the proposal to extend the rule to all tax categories was rejected after public consultation. I suspect that we will have a very enjoyable canter on taxation rules in Committee.
	I come to the question of deeming, which is also a matter of interest and concern. I have referred in brief already to the question of the 17 out of the last 20 years. Clearly in our consultation the Government gave great consideration to that. But in the light of the consultation's consideration and its rejection, one would have to think very carefully about reopening the question so soon.
	In addition, I have to say to the noble Lord, Lord Oakeshott, as I said last time, that we are concerned with the proposal to deem Members of the House to be domiciled tax-resident and ordinary tax-resident in no country other than the UK. Taken together with the Bill's amendments to the Income and Corporation Taxes Act 1988, the provision would override the double taxation treaties. The Government have made it clear that we cannot ride those treaties unilaterally. Amending them by bilateral agreement is unlikely to be a practical suggestion, since this Parliament has no jurisdiction over how other countries define individuals as resident or non-resident for tax purposes. That indicates that, whatever the principle behind the Bill, it is not a simple matter of simply passing it without giving due consideration to all these difficult matters.
	On the question of Peers who work abroad, the noble Lord, Lord Goodhart, made a very pertinent point in the last debate and today's debate as well. I hope that there will always be cases of Members of this House working abroad, sometimes for long periods of time, in high-profile international organisations. Long may that continue and long may they then be able to come back to your Lordships' House. We have seen in our debates on foreign affairs the huge advantage that that brings to your Lordships' House. We would have to be very careful about that.
	Aside from the technicalities of all these matters, it is worth bearing in mind two points. First, the House of Lords Appointments Commission has informed the Prime Minister that, as from June 2007, nominees need to be resident in the UK for tax purposes before the commission will consider their nomination. I understand that that policy covers both political and non-political candidates. I also understand that it has been reaffirmed by the noble Lord, Lord Jay of Ewelme, who has taken over the chairmanship of that commission.
	As the noble Lord, Lord Teverson, suggested, one needs to place this Bill in the wider context of Lords reform. As I have said, we referred to and dealt with the matter of tax status in the White Paper on Lords reform, proposing that all Members would need to be resident in the UK for tax purposes. The noble Viscount, Lord Astor, quoted from the White Paper, and my noble friend Lord Lipsey felt that the morning glory of that White Paper had gone. I do not know whether the noble Lord, Lord Strathclyde, or I ever felt that it felt like morning glory. The morning may have gone, but there are still elements of glory in that remarkable document.
	This matter is much better dealt with in the context of comprehensive reform of your Lordships' House. I very much agree with the noble Lord, Lord Trefgarne, on that matter. We have set out those proposals. I totally disagree with my good and noble friend Lord Lipsey on his analysis that Lords reform might be many years to come. I remain confident that it is entirely possible, based on the consensus reached between the political parties in the White Paper, and following the next general election. That is surely the best way in which to deal with this important matter.

Lord Oakeshott of Seagrove Bay: My Lords, I thank all noble Lords who have spoken. I should probably start by apologising to the noble Lord, Lord Selsdon, for shooting his fox. He was obviously deeply disappointed that I was, as my noble friend Lord McNally said, statesmanlike. Indeed, noble Lords may have heard not a breath of partisan comment pass may lips—and I must chide him gently for bringing in a political note.
	There is an important point, however—and I was sorry that neither I nor my noble friend Lord Goodhart seemed to manage to get it across to the noble Lord, Lord Selsdon, or the noble Viscount, Lord Astor. Indeed, there were one or two passages in the Minister's speech where there seemed to be confusion about how the Bill would work. Let me put it even more simply, if I can. We are just saying that noble Lords will be taxed as if they were fully resident and fully domiciled in this country, and no other. It is a very simple point.

Viscount Astor: My Lords, the noble Lord, Lord Oakeshott, has repeated his mantra, but the problem is that that is not what his Bill actually says. The Bill says:
	"No person shall become a member of [this House] who is not resident, ordinarily resident and domiciled in the United Kingdom".
	It has nothing to do with different bases. It is not equivocal or more complex than that. Or is the noble Lord saying that he will change Clause 1(6)?

Lord Oakeshott of Seagrove Bay: My Lords, I am sorry, but that would be for the future. No one will become a Member of this House on that basis in the future. That is made quite clear and that is the position of the Appointments Commission. The Bill mainly seeks to deal with the people who are here already. That is why that clause is different. For the people who are here already, it is clearly on that basis.

Viscount Astor: My Lords, I am sorry to interrupt, but the Appointments Commission, as I understand it, deals with residency and has nothing to do with domicile.

Lord Oakeshott of Seagrove Bay: My Lords, the principle is clear and I am sorry if I did not fully get it across.

Lord Hunt of Kings Heath: My Lords, noble Lords may find this helpful. The noble Lord, Lord Jay of Ewelme, gave evidence to a pre-appointment hearing before the Public Administration Select Committee, on 22 July. Speaking about new appointees, he said:
	"As I understand, they should pay UK taxes".
	He continued:
	"I think anybody who is appointed to the House of Lords should be paying taxes in this country and, in addition, should be playing an active part in the House of Lords".
	That is probably helpful .

Lord Oakeshott of Seagrove Bay: My Lords, moving on, I thank the noble Lord, Lord Lea, for his support. He made a very powerful point about the irresponsibility of financial elites. In particular—he did not name anyone but I will—he picked out Merrill Lynch, which has so arranged its affairs to create enormous tax losses and will not be paying tax for many years in this country.
	I thank my noble friend Lord Goodhart for his support. We talked a little about the cost of this debate, but when you listen to my noble friend's speech I have to say that it is worth £100,000 of anyone's money. I also thank the noble Lord, Lord Lipsey. All I can say after that speech is that I wish he were the Minister.
	My noble friend Lord Teverson made a powerful speech. I very much liked his view about the tax we pay being a membership fee to the nation. We do not want any country Members in this House.
	The noble Lord, Lord Trefgarne, like the noble Lord, Lord Hunt, is against piecemeal reform, but to my regret and that of many of my colleagues, it will be several years before comprehensive reform comes about. Surely, whatever one's views on reform and the right shape of the elected Chamber, this is a problem that could be rectified now. Whether Members are elected or appointed, the principle is just the same.
	In her intervention, the noble Baroness, Lady Gardner of Parkes, rightly made the point about a £30,000 limit, but such a limit would be a flea bite for a multimillionaire. Not that he will be a Member of this House, but for Mr Abramovich that would be a round of drinks at Stamford Bridge. A £30,000 limit does not affect the basic point. I imagine for some Members of this House who are non-domiciled, a £30,000 limit would also make little difference.
	I thank my noble friend Lord Wallace of Saltaire for his very powerful speech.

Lord Forsyth of Drumlean: My Lords, is the noble Lord not missing something? Although the Mr Abramoviches of this world do not pay income tax, they do pay other taxes such as VAT and make an enormous contribution to the Exchequer. It is hard to see how Chelsea Football Club would survive without Mr Abramovich.

Lord Oakeshott of Seagrove Bay: My Lords, we are drifting slightly off the point. I do not know how up to date the noble Lord, Lord Forsyth, is, but Chelsea Football Club is up for sale and Mr Abramovich is trying to get out. He has fallen on rather hard times, I am afraid.
	Turning to the speech of the noble Lord, Lord Strathclyde, I am bound to say that from the previous time I introduced the Bill in this form and from the encouragement I received, we have moved to a more sceptical position. He and other noble Lords said that it did not find favour last time round. It is not a question of that; it ran out of time. There was only one vote on it, which we won, so that was not a fair comment. We are now trying to proceed with the Bill and have started much earlier in the Session. The noble Lord teased me about my voting record. I am not at the top of the Liberal Democrat list. He might say that I would be in relegation trouble, but if I were a Conservative Peer, I would be right up in the Premier League with that voting record.
	The key words I heard in the speech of the noble Lord, Lord Strathclyde, were that if you were a Peer, you should pay British tax. He did not say you should pay all British taxes; he said that you should pay British tax. That could mean pennies, or a bit of VAT. Whether or not it means all British tax is a very important issue. I invite the noble Lord, if he does not agree, to stand up.

Lord Strathclyde: My Lords, if that is going to be the standard of debate that we will have in Committee, then bring it on.

Lord Oakeshott of Seagrove Bay: My Lords, I reiterate: would the he care to insert the words "full British taxes" into what he just said? No. We shall see; it is a very important issue. "Tax" is quite different from full British taxes on the basis that you are fully resident and domiciled in this country. That is extremely significant.

Lord Selsdon: My Lords, we must look at double taxation agreements.

Lord Oakeshott of Seagrove Bay: My Lords, as far as I am concerned, Members of this House should pay full British taxes and that is an end to it.
	This is a Second Reading debate, and we have had a good discussion of the principles. I have tried to keep it on principles and not personalities and there is an important issue here. I am disappointed by the Government's reaction. They may not like the Bill—and I can understand that and that they might want to amend it—but I am disappointed that we are still hearing the argument that, because the Budget two years ago said that there would be no substantial change in the position of non-doms, that somehow stops a long overdue reform of this House, which would be minor in terms of the overall number of non-doms here and is almost a self-regulatory issue. I cannot see that that is a sensible excuse to hide behind, so I am disappointed. If the Government do believe in making these changes, I wish that they would get on with it. I would be happy to work with them, but I am disappointed at the tone, which seems to suggest kicking this into the long grass. I hope that as the Bill progresses we will move forward.

Lord Hunt of Kings Heath: My Lords, the noble Lord said that this was a marginal issue compared with the general principles. However, today's debate has shown that it is unwise to deal with taxation matters simply in the way that the noble Lord suggests without understanding the wider implications for taxation policy, which has clearly been demonstrated. On the question of kicking the issue into the long grass, does the noble Lord not recognise that the danger of these incremental approaches to Lords reform is that they will inhibit the move towards fundamental reform? I will take the same view about the Bill proposed by the noble Lord, Lord Steel, for the same reason.

Lord Oakeshott of Seagrove Bay: My Lords, I do not wish to fall out with the Minister on that because in general terms I agree about the major changes. But the point about the change in this Bill is that it is effective, important and urgent, whatever one's views about the wider issue of Lords reform. With that, I thank the many speakers who have been supportive and ask the House to give my Bill a Second Reading.
	Bill read a second time and committed to a Committee of the Whole House.

Equal Pay and Flexible Working Bill [HL]

Copy of Bill

Second Reading

Moved By Baroness Morris of Bolton

Baroness Morris of Bolton: My Lords, it gives me enormous pleasure to have the opportunity and privilege to introduce this Bill today. Equal treatment, equal pay and family-friendly working practices are issues that I care passionately about, as they are to all noble Lords taking part in today's debate. I am enormously grateful that so many of your Lordships, with a wealth of experience and often a lifetime of dedication to these causes, are speaking.
	At its heart this is an issue of social justice. Equal pay is not just for high-flying women in the City, in law or industry, who are often earning hundreds of thousands of pounds a year. It is just as much about ensuring proper protection for women at the bottom of the pay scale who are working hard to provide for their families, day and night, and who do not have the voice or the confidence to fight for fairness.
	The Bill was born from the excellent work carried out by the Conservative Women's Policy Group, which outlines the opportunities and challenges that women face today. It spent months of hard work travelling around the country, speaking to many women and tackling some difficult and disturbing issues. It was left in no doubt that, by all measures, the gender pay gap, its existence and extent, is beyond doubt. They suggested as a remedy the measures included in the Bill.
	My right honourable friend Theresa May wrote to Harriet Harman to say that these are such important issues that we would be happy for them to be included in the forthcoming equalities Bill. Although the Government are undoubtedly sympathetic, our offer was declined so I decided to introduce a Private Member's Bill to bring this debate to your Lordships' House. I am not seeking to do anything revolutionary, simply to ensure that the Equal Pay Act 1970, which arrived on the statute book while I was still at school, is properly observed. I also wish to build on the current flexible working practices that the Conservative Party has warmly supported.
	The purpose of the Bill is twofold. First, it would strengthen existing pay legislation to make it more effective in the face of unfair treatment. It would do so in two ways. First, it would change the "material factor" defence to include a test of reasonableness. The Equal Pay Act currently provides for the "material factor" defence for cases where the variation is genuinely due to a material factor which is not the difference of sex. However, tribunals are not presently required to agree that such a material factor is reasonable, only that it was the cause of the pay difference and that it was not discriminatory. For example, an employer could say that it was reasonable to pay a woman working in Manchester less than a man doing an equivalent job in Leeds, without having to prove that the cost of living in Leeds was greater than in Manchester.
	Clause 1(2) introduces such a reasonableness test for the "material factor" defence, which would make it easier to identify cases where pay discrimination is indirect and not just direct. Employers do not currently have to give a justifiable reason for pay inequalities. While I acknowledge that this can be a complicated area, and employers have every right to pay different amounts where a woman genuinely wishes to vary her contract, there is clearly room for abuse and the Bill would close that loophole.
	I must apologise for a drafting error. Those who have worked with me on Bills will know that I could never aspire to be a parliamentary draftsman. In my defence, however, this was looked at by a number of people. I am most grateful to the noble Lord, Lord Lester, whose eagle eyes spotted the mistake. Clause 1(2) should read, "In Section 1(3) ... before paragraph (a)". This will be amended at a later stage of the Bill.
	Clause 1(3) of this Bill covers equal pay audits, the use of which must be strengthened to make them more effective. At the moment, if an employee takes their employer to a tribunal and that employer is found guilty of discrimination, the appropriate action is taken and the case ends there. If another employee suspects that they are also a victim of such discrimination they would have to bring their own action, effectively starting the whole process from scratch. Subsection (3) would introduce the requirement that employers found guilty at tribunal would have to undertake an equal pay audit, thereby benefiting all other employees and identifying and rectifying any further abuse.
	Pay audits are costly, time consuming and demand that organisations publish their findings. That is why I agree with the CBI that it would not be sensible to overburden business or for all employers to undertake a pay audit, although my proposed change would go a long way to deter discriminatory practices in the first place. However, companies and organisations that have undertaken voluntary pay audits, such as the Inland Revenue, have found that the process improves employee morale, loyalty and relations, which in turn have a beneficial effect on productivity—although I hesitated to mention the Inland Revenue and "productivity" with 31 January looming.
	The thinking behind subsections (2) and (3) in Clause 1 is to promote good practice and encourage employers to adopt a fair and sensible approach to rewarding their staff. The majority of this country's employers are good and caring, and are exemplary in this regard. Apart from a small number of bad employers, I genuinely believe that the others have not set out intentionally to discriminate, but have drifted there unknowingly. Over the years, they have paid a little more here and there, especially when bonuses are taken into account. However, unintentional action is no defence.
	The second purpose of the Bill is to extend the right to request flexible working to all parents with children under the age of 18. Clause 2 amends the Employment Rights Act 1986 to this effect by removing the legislation that currently limits the right to request flexible working to parents with children aged six and under and carers, which came in with the Work and Families Act.
	I think it is legitimate to ask why I am introducing the Bill now, in a period of such economic uncertainty and turmoil. I agree that the last thing that we should be doing at this time is subjecting businesses to more red tape and regulation, but this is not an extra regulation. Many companies operate flexible working practices already, with enormous success. Many companies strive to pay all their employees fairly and according to their talent and experience rather than their gender. The Bill therefore imposes absolutely no extra burden on them.
	However, pay inequality is not acceptable whatever the economic times are. We must ensure a culture of equality and fairness in the workplace, to motivate women, who will play a crucial part as the economy recovers. I am sure that noble Lords around the Chamber will share my dismay that, in the 21st century, women are still paid on average 17 per cent less than men. That figure rises to 36.3 per cent for part-time work, and 45 per cent of women who work in the UK do so on a part-time basis.
	These are often women who are supporting children, elderly parents or, in the current climate, unemployed partners. They deserve to be treated fairly and to be protected by the law. The Government have made some admirable pledges in this area but, unfortunately, to little avail. The pay gap actually widened last year. That is why I am bringing this legislation before your Lordships' House today, in this time of financial uncertainty for so many British women, so that we can give them the help and support they need now.
	A report from the TUC last summer made a direct link between low levels of women's pay and child poverty. I ask your Lordships to consider these proposals in that light. Half of all children living in poverty are being raised in households where one or both parents work. If the working mother is trapped in a low-paid job, or one which affords her precious little quality time with her family, that will have a direct effect on the welfare of her children.
	The issue of flexible working goes hand in hand with this. In order to balance family commitments, women often return to work, after having their children, to lower paid and lower level jobs than they previously held, as that is the only employment available to them. If flexible working were available to all parents—crucially, that means fathers as well—the burden of childcare could be shared and work could fit more easily around family commitments.
	Flexible working does not have to be a burden on business. Working Families says that,
	"flexible working is a resounding success, bringing benefits to employers and families".
	In fact, many companies operate flexible working practice already, some without even realising it. Flexible work does not necessarily mean part-time work but can incorporate a variety of working practices, including flexi-time, home working or job sharing. It has been proven to increase staff commitment, productivity and retention. It can save on office costs, rehiring and retraining and enables companies to build a viable, committed team who feel immense loyalty towards their employer for respecting their right to family and other commitments outside work.
	I am very pleased that the noble Baroness, Lady Vadera, will respond to the debate on behalf of the Government and very much look forward to hearing her comments. I am sure that, as a former banker, many of the issues I have raised will have particular meaning for her. Personally, I am in favour of extending the right to request flexible working as widely as possible, although I hesitated to go so far as to say that the right should be extended to all workers under the Bill because I care about not overburdening businesses, especially small businesses, and a total right would need careful and detailed discussion. But the companies that have made it a general policy have reported greater productivity, better staff retention levels and an ability to adapt to the 24-hour culture that the modern business world demands.
	At the end of last year I had the privilege of attending a gathering at Manchester Town Hall organised by the Lord Lieutenant of Greater Manchester for all the women of Greater Manchester who had served so valiantly in the Land Army and Timber Corps during the Second World War. We had a great afternoon. We had a thanksgiving service, sang all the old wartime songs and then had tea. One of these remarkable women, to whom we owe so much, told me how back-breakingly hard the work had been and how the women had to do the same work as the men. "Mind you", she said, "we didn't get paid as much". I beg to move.

Lord Morris of Handsworth: My Lords, the aim of the Bill is straightforward, succinct and, indeed, necessary. I thank the noble Baroness, Lady Morris of Bolton, for bringing it forward. As we have just heard, the Bill has three clear aims. First, it establishes a new test of reasonableness as a defence in an equal pay claim. Secondly, it provides for a compulsory pay audit where employers are found guilty of gender pay discrimination. Thirdly, it extends the right to request flexible working to parents of children up to 17.
	I want to say a few words about these principles before I offer a general comment on the social and economic case for supporting the Bill. Currently, all that an employer has to prove is that the difference in pay between a man and a woman is not caused by direct or unjustifiable indirect sex discrimination. Under the Bill, any difference in pay between a man and a woman in equivalent jobs must be objectively justified and reasonable. My worry here is that "justification" could become a legal paradise in which lawyers play. Under the Bill, where employers are found not to be meeting the statutory requirements of the Equal Pay Act, they will be obliged to institute a pay audit, as we have heard. As the pay audit will be a statutory requirement, we should be told what form it will take, its methodology and who will carry it out. Will the results be published and, if so, where and by whom?
	While I welcome the Bill, I can already hear the echoes of the backwoodsmen from the CBI and every other employers' organisation in the land asking how anyone can promote these measures at a time like this, and saying, "You will bring the economy to its knees". For good measure, they will think of a number, double it and claim the result as the number of jobs that will be lost if the Bill becomes law. I only hope that this time they will not have the support of the party opposite, as we saw in the debate on the minimum wage a few years ago.
	Let me look at the evidence on why the Bill is needed. We have heard the noble Baroness, Lady Morris, mention some of the figures, which are substantiated. The evidence shows a 17 per cent pay gap between a man and a woman doing the same full-time work: for every pound that a man earns, a woman earns only 83p. In the private sector that gap widens: a woman earns 78p—a 38 per cent gap. It is no wonder that last year 44,000 equal pay claims were brought before the courts, which means that all of us as taxpayers are meeting the cost of pay discrimination.
	Throughout history the women of this country have always had to fight to get pay justice, from the match girls in the East End of London to the gallant sewing machinists at Ford in Dagenham in 1968, who discovered that they were being paid 15 per cent less than their male colleagues for doing exactly the same job. After three weeks on strike, with the mediation of the late Barbara Castle, the Ford sewing machinists took a giant step towards pay justice, which established the case for the Equal Pay Act 1970.
	On the last leg of this Bill on the right to flexible working, history does not guide me. However, I will say this: in the busy world of today's labour market, flexible working can be a liberating experience in balancing the demands of home and work. Ironically, at a time of economic recession, flexible working is exactly what the economy needs. One thing is clear—as the social order within families is rebalanced, the essential ingredients of work will be when we work, how long we work and how we balance working time and family time. The Bill is an idea whose time has really come. It is morally right and socially just and on that basis I wish it well.

Baroness Howe of Idlicote: My Lords, I warmly congratulate the noble Baroness, Lady Morris of Bolton, on introducing the Bill. I also congratulate all her Conservative female companions who did all the footwork in gathering the statistics to back it.
	The Bill may not be perfect—indeed the noble Baroness admitted as much—but, above all, it keeps the issue of equal pay for men and women, and flexible working, firmly in the public eye. Certainly there is a need for all employers, not least at this time of critical economic uncertainty, to keep both issues high on their priority agenda.
	Progress towards equal pay for work of equal value for full-time employees has undoubtedly been appallingly slow, given that the Equal Pay Act was passed nearly 40 years ago in 1970. The 2008 figures show that the gap has increased slightly this year—we have already heard that from the noble Baroness. However, given that the UK was among the first nations to introduce equal opportunity laws, it would be interesting to know where we stand in the world league table on progress towards equal pay. Perhaps the Minister may answer that.
	However, even more worrying is the pay gap for part-time workers, which stands at as high as 36.3 per cent. As noble Lords will know, the majority of part-time workers are women, mainly due to family responsibilities. Today, no fewer than 45 per cent of all women employees work part-time, despite the fact that more fathers are beginning to take some share of family responsibilities.
	On the equal pay front, the Bill, as I understand it, will only require companies that have been found by a court or tribunal to be in breach of the Act to undertake a company-wide equality audit. I, too, have read what the CBI and others have said, and there are some reservations. We must pay particular attention to the problems of SMEs; perhaps that can be looked at later. However, there are, surely, substantial benefits. The Bill would certainly simplify the whole process and cost taxpayers less, as the noble Lord, Lord Morris, said. It was my experience as the first deputy chairman of the EOC that, once a clearer legal requirement was in force, companies made far more effort to obey it.
	However, I want to concentrate on the flexible working aspects of this Bill. The younger generation of company executives know that it is in their own and their companies' best interests if they can hold on to the talent that they have recruited and trained, but there are still too many employers of the old school who have not realised how expensive it is to keep on recruiting, retraining and churning employees, rather than investing further in those that they have already spent money on.
	This Government have done a great deal to promote a better work/life balance, and I congratulate them on the initiatives they have taken, even if those initiatives have not always delivered as fully as other noble Lords and I would have hoped. More nursery provision is not enough. Encouragement of flexible working allows many more mothers to combine caring for their children. We also know that often they may be caring for their own ageing or disabled family members. Flexible working helps women not only to continue in employment but, of course, to contribute to a retirement pension. The Government's recent Pensions Act—for which congratulations are also due—has helped considerably with its better pension opportunities for women, and particularly the extra buy-back options which enable those who qualify to purchase a higher pension. It is no longer acceptable for there to be a 40 per cent gap, which still exists, between men's and women's pensions, nor is it even remotely acceptable that women's potential remains undeveloped, when competition in today's global market requires employment of the nation's best talents, whether they are in men or women.
	Women will continue to be the majority of those who live in poverty at the end of their lives, unless more drastic action is taken to make flexible working at relevant times of their lives the norm for both sexes. I thoroughly underline what the noble Baroness said about both sexes. There is clear evidence, too, that more fathers want to take a more active and responsible role in bringing up their children. Yet, although some 14 million employees now work flexibly, the vast majority are still women.
	Some months ago an Oral Question was asked about how many women had used the right to request flexible working under recent European and domestic laws and to how many women it had been granted. The answer for women was quite encouraging, given that we were at the start of the process. Yet, when I followed with a supplementary question, asking how many men had asked for and been granted the same flexibility, the Minister who replied had not even been briefed on that.
	Research shows a positive relationship between flexible working, lower stress and improved health and well-being, and there are many varied ways in which flexible working can be achieved—working term-time only, working from home or job sharing, for example. Almost invariably, the employer gets value for money.
	The Cranfield School of Management is quoted by Working Families as having demonstrated that the cost to employers of making such adjustments was £68 million, while the benefits from higher productivity, lower turnover and reduced absenteeism were £91 million. All that this Bill proposes is an extension of the hours already available from April of this year for 16 to 18 year-olds, by sensibly anticipating the raising of the school-leaving age in a year or two to the same level. The Bill would also bring some uniformity to other groups that need the same ability to combine employment with caring—those caring for children with disabilities or special learning needs, and disabled adults. Carers play a vital role and save the state huge sums. We also know that there is high support for this right to be extended to all employees. I hope that the Bill's proposals will be a firm step in that direction. It already happens in Holland and Germany, where employees have the right to request flexible working from all employers. We also know from research that 58 per cent of men and 63 per cent of women in this country support the move for this right to be available to all employees.
	I end by stressing that given the horrendous economic situation and considerable job losses already being recorded throughout the economy, there are forecasts that women will be the first and the most to suffer and lose their jobs. Yet a wider ability to request flexible working would be invaluable to women, as well as a valuable tool for employers to help them keep their companies and their employees in work. I wish the Bill well and, again, I congratulate the noble Baroness on introducing it.

The Lord Bishop of Southwark: My Lords, I wish to focus on the Bill's second part, which concerns flexible working. The right reverend Prelate the Bishop of Southwell and Nottingham sponsored a debate on this subject in March 2008. Even in the current difficult economic climate, from these Benches we urge the Government to keep to their strategy of encouraging the right to request flexible working and to close the age loopholes.
	We recognise that a major part of current government policy in combating poverty and reducing benefit dependency is maximising the number of people in work. On the other hand, the Government increasingly emphasise the responsibility of good parenting, and we support that. Therefore, we have two policies. We agree that work is good. It provides not only economic opportunities but important personal and social benefits, enabling individuals to develop their skills and talents, enhancing self-worth, encouraging a sense of responsibility and enabling individuals to make economic and social contributions to society. However, flexible working is the essential link that would help to make those two policies compatible. We need to continue to address the negative impact on employees' family life of long hours, inflexible working and atypical working patterns. It is those in employment on the lowest incomes who work the most atypical hours without being to control them.
	Having a parent see-sawing between work and benefits because of the time demands of the work will do nothing for the security of the family income or to help combat child poverty. Nor will it help build stability in the family. For the Government it is particularly important that, when encouraging lone parents to return to work, that work should not create such stress that those parents end up taking time off or abandoning the work because they cannot fit it in with the responsibility of looking after their children. Giving parents good, affordable childcare, a decent wage and the right to work flexibly will make a huge difference to the family's well-being, contribute positively to relationships within the family and encourage the social, emotional and educational well-being of the children.
	Flexible working arrangements can work for employers, too. There is little evidence that long hours bring increased productivity. The organisation Working Families says that its recent research with Cranfield School of Management shows a positive relationship between flexible working hours and individual performance. It argues that in the current economic climate maximising productivity and performance will have to be a priority. Many employers now recognise the link between flexibility and organisational requirements, even for low-income employees, with higher productivity, lower turnover and reduced absenteeism.
	We congratulate the noble Baroness, Lady Morris, on sponsoring the Bill, and we hope that it meets with every success.

Baroness Gould of Potternewton: My Lords, I start by declaring an interest as the chair of the Women's National Commission, which is currently discussing these issues at great length.
	Although I have reservations about the proposals in the Bill, I have no reservations about the principles of the noble Baroness or the intent behind the Bill to eliminate inequalities in the workplace and provide greater support for working families. It is that latter point on which I wish to start my comments.
	Supporting families in balancing work and home has been a key plank of the Government's employment policies since the establishment of the Work and Parents Task Force in 2001, followed by the Employment Act, which, I regret to say, at that time the Opposition opposed, the extension to carers in 2007 and the Walsh review in 2008. The aim of all those actions has been to support families in finding working hours to match their caring responsibilities, whether for children or for adults in need of care or, all too often, for both. Families must have genuine choices about how they balance work and caring responsibilities, which are now more complex with the many changes in family structures and the development of more intricate family arrangements, which have shaped income, living standards and working patterns.
	Alongside supporting families, it has been important to enable businesses to plan and manage their workforces effectively, and there is no question that employers have benefited. As the noble Baroness rightly said, employers who have adopted flexible working have benefited not only from lower levels of sickness and absenteeism but from improved retention performance. There is clear evidence of a positive relationship between flexible working and individual performance—a view that is endorsed by the British Chambers of Commerce in its briefing on the Bill, although at the same time it opposes the detailed proposals before us. However, more needs to be done to raise awareness of the right to request flexible working among employees and employers.
	The Government's regulatory impact assessment, which accompanied the recent Walsh review, showed that extending flexible working to parents of older children could lead to savings for employers. As the noble Baroness, Lady Howe, said, the annual cost to employers of making adjustments to working patterns stood at £69 million, compared with the benefit from higher productivity, lower turnover and reduced absenteeism of £91 million. Therefore, I think that the argument for extending this right to parents of older children is made.
	The in-depth Walsh review, after consultation with a wide range of stakeholders, recommended that parents with children up to the age of 16 should be able to apply for flexible working, a view which the Government accepted and which is due for implementation in April this year. The amendment before us was considered by Imelda Walsh but rejected on the grounds that over the age of 16 a child is a young adult and is therefore of an age to take personal responsibility and show a good measure of independence. I also think it is not appropriate to suggest a further change at this time, when employers have been adjusting their working patterns to implement the Walsh recommendations. Again, as the CBI said, consideration of a further extension so quickly seems premature. The British Chambers of Commerce put it more strongly, saying that it would damage business and send the wrong message to businesses at this time.
	On the question of equal pay, while there has been a reduction in the median overall gender pay gap since 1997 from 27.5 per cent to 22.6 per cent in 2008, in accord with other speakers, I am stating the obvious by saying that progress has been slow. There are many factors in the continuing pay gap which have to be overcome. The gender pay gap is complex and encompasses many factors besides pay discrimination: differences in men's and women's labour market experiences; skills and education; occupational segregation; lack of quality of part-time work; historical culture; and gender stereotyping.
	An analysis by the Women and Work Commission, chaired by my noble friend Lady Prosser, suggested that, if more women moved into higher-skilled, higher-paid occupations and if more moved into the labour force or increased their hours, the potential benefits for the UK economy could be worth £15 billion to £23 billion or 1.3 to 2 per cent of GDP. That shows that no country can afford to ignore the skills and talents of half its population. So, clearly, this historic inequality has to be tackled.
	The Conservative policy document, Women in the World Today, says that these amendments to the Equal Pay Act would tighten the law by introducing a "reasonableness test" into the Act, but all the evidence from those who work on the ground on these issues suggests that in reality that would not be the case. A "reasonableness test" implies a subjective test, with courts required to view the justification of the factor giving rise to the pay gap from the perspective of the employer—for example, knowing what the employer knew and how it operated in those particular circumstances—and it could be considered reasonable to use that factor as a determinant of pay, regardless of the discriminatory effect it has on women.
	It is also difficult to decipher what an "objectively justified as reasonable" test means, as it becomes jumbled up with "objective justification", which is the standard defence for indirect discrimination. That might add further to the already complex and labyrinthine case law, lead to further confusion in the tribunals and courts and delay further the already very slow process of equal pay claims. That is certainly not what women with equal pay claims need. Therefore, it is helpful that the Government intend to simplify equal pay legislation in the equality Bill. The amendment might also give the impression that a weaker standard of justification was required than was actually the case under EU law.
	The TUC and others, such as the Fawcett Society, have campaigned for many years for mandatory equal pay audits, and the Equality and Human Rights Commission, in its briefing on the equality Bill, states that equal pay audits can be a useful mechanism in testing how organisations approach equal pay issues. Equal pay audits were also recommended in the code of practice on equal pay, which received parliamentary approval in 2002. However, views are divided on the value of pay audits, and no doubt there will be considerable further discussion on the issue. I have doubts about the particular conclusion that is suggested in the Bill. I doubt that it is the responsibility of the courts or the industrial tribunals in the manner suggested in this Bill.
	It is clear, however, that we cannot tackle inequality if it is hidden. If you cannot see the problem, you cannot solve it. I appreciate that, if equal pay audits are to be taken forward in the equality Bill, they will only resolve part of the problem, but it is an important part. They will have to be combined with sensible transitional arrangements, taking into account the cost of the process. If pay audits are not pursued, other measures will need to be put in place to increase transparency of pay and remove this long-term discrimination against women. For instance, procurement offers significant potential as a way of promoting equality and good equal pay practice. It is therefore encouraging that the Government have signalled that they intend to use procurement positively to promote equality. This follows the positive approach to procurement in Northern Ireland under the Northern Ireland equality of opportunity contract condition, and by the GLA in respect of the Olympics.
	Other measures might include strengthening the role of equality representatives and allowing hypothetical comparators, rather than the current requirement for actual comparators. Equal pay is the only area of discrimination law where claimants have to identify an actual comparator in the same employment who is treated differently from them. These and other preventive, positive and pragmatic reforms will make a much-needed shift in approach to gender pay.
	Recent polling by UNISON and the Fawcett Society showed that 83 per cent of women and 74 per cent of men maintained that pay difference must be closed regardless of the credit crunch. I support the noble Baroness: even in difficult economic times equality should not be put on the back burner. We need a positive pay policy, and we need radical measures that will eradicate pay discrimination and illegal pay practices and, ultimately, prevent pay discrimination in the first place. I am afraid—I regret to say this to the noble Baroness—that I do not believe that this Bill will achieve that aim.

Baroness Prosser: My Lords, I declare an interest as the deputy chair of the Equality and Human Rights Commission, a body which is closely involved with the Government Equalities Office in discussions on the forthcoming equality Bill. I thank the noble Baroness, Lady Morris of Bolton, for introducing this Second Reading debate. It is a good opportunity for those of us in the Chamber to raise issues about which we are concerned. Sometimes, those of us who are involved in this day-to-day begin to wonder if anybody else is particularly interested. It is a fine opportunity, which I particularly welcome.
	The proposed Bill is like a curate's egg; it is good in parts, but some parts may be either unnecessary or lead to what we might describe as unintended consequences. The first of those is the reasonableness test. I dread to think how many hours have been spent over many years by many lawyers discussing the meaning of "reasonable". Many fine houses have probably been built and bought on the income from such discussions. If we introduce another test into this part of the legislation, it will not make life easier and may well make life more difficult. We would not, I think, want to widen the circumstances under which an employer would be able to find a material-factor defence. In any case, this all has to comply with European legislation. All in all, we may find ourselves in more difficulty, rather than a better place, by agreeing to that part of Bill.
	On flexible working, it is interesting that the British Chambers of Commerce is anxious about this proposal. It conducted a survey in 2007, in which 89 per cent of those companies surveyed said that they provide some kind of flexibility. I spent yesterday evening in the lovely area of Tunbridge Wells, addressing a range of employers about the likely impact on women's employment of the current recession. It was interesting that these employers, mostly small and medium-sized enterprises, were very much in favour of flexibility. We have all discovered that flexibility suits many people. We could not possibly go back to the previous situation, before these various terms and opportunities for employment were available.
	The Government's proposals for 16 year-olds are probably sensible and appropriate. I left school aged 15. At 15 I was taking the bus and Underground from Surrey into central London to work and home again in the evening. For parents to be able to organise their work around their young people, up to the age of 16, is a move far enough.
	On flexibility, I would also say that all who have the opportunity should encourage employers and trade union negotiators to try to ensure that flexibility is available to everybody. In many companies that already happens, and in many companies flexibility that is available only to parents is resented by some. The Equal Opportunities Commission, before it closed in October 2007, received its largest percentage of requests for information on the right to flexibility from men who did not want to commute on the most crowded trains. Many people would like to work in different ways for different reasons. We should all try to bear that in mind.
	I turn now to the question of pay audits, which is probably the nub of this Bill. I am not against the proposals, and I do not think that the Equality and Human Rights Commission would be against them. We would only say that they are unlikely to make much difference. There are very few equal pay cases which succeed at tribunal. Many are settled before reaching court; many more are lost. I will come to that in a moment, when talking about the Equal Pay Act itself. The much bigger problem that we need to look at is not whether an extension of the legislation or a new piece of legislation will help. We need to look at the real reasons for the gender pay gap and what role is currently played by the Equal Pay Act.
	On the gender pay gap, the Women and Work Commission report has already been mentioned by my noble friend Lady Gould. I chaired that commission between 2004 and 2006. We discovered that there were three major reasons for the gender, pay and opportunities gap. First, there are the educational choices made by girls and a lack of quality guidance for girls on what those educational choices will lead them to in the world of work. Secondly, there is occupational segregation, both in workplaces and across the labour market. Thirdly, there is the poor quality of part-time employment. There is an enormous lack of good-quality part-time employment available. One of the pay gap statistics which is most telling is the gap between women who work part-time and women who work full-time, which is currently around 33 per cent. That tells you something about the nature of available part-time employment.
	We need social policy programmes to improve these things and we need flexibility, as has already been mentioned. I am grateful to the Government for agreeing to extend the right to request. I am pleased that in recent years our Government have extended and improved rights to maternity and paternity leave and I appreciate the efforts to make childcare more available. The cost of childcare is still a major problem and one of the big reasons why many women turn to part-time, local employment. The nature of their skills does not allow them to earn sufficient money to be able to work full time and pay childcare costs.
	We also need what I call second-chance education. Much more effort needs to be put into programmes to upskill and retrain those women who have gone from doing what we might term decent-quality jobs to working in jobs much below their capabilities. My noble friend Lady Gould mentioned the loss of earning power of the women who go from decent jobs to lower-skilled and lower-paid jobs. The Women and Work Commission has estimated the cost of that to the Exchequer to be between £15 billion and £23 billion a year. We made those arguments when the Women and Work Commission produced its report. In the following Budget, in March 2006, the then Chancellor of the Exchequer, Gordon Brown, allocated £40 million to be spent on specific retraining and upskilling programmes for women. That money has been used effectively and those programmes are being continued.
	The Equal Pay Act, to use the vernacular, is a busted flush; it does not work. Anyone involved in negotiations or working within the legal area will say that we need to start again. It is almost 40 years since the Act was introduced and during that time we have had a complete change of pattern within the labour market: local authorities have contracted-out services, most of which are sex segregated; the Act does not allow women to compare themselves with men in a different employment; central government departments have been divided into agencies; and people employed in those separate agencies are not deemed by the courts to have a single source of employer. The way in which labour is organised these days means that the legislation just does not match what is required. We need a root-and-branch change to current legislation.
	I and the Equality and Human Rights Commission welcome the opportunity brought about by the equality Bill. We welcome many of the proposals, particularly the banning of secrecy clauses and the introduction of positive action. I end by thanking the noble Baroness, Lady Morris, for introducing the Bill. It brings the issue onto the agenda in a very necessary, helpful and welcome way.

Baroness Morgan of Huyton: My Lords, I applaud the personal commitment of the noble Baroness, Lady Morris of Bolton, to the goals of equal pay and flexible working. All of us here share those goals and I welcome the chance to join in the debate.
	However, I have some concerns about the specific contents of parts of the Private Member's Bill and about the overall approach. In recent years, we have made great strides on this agenda, but it is important to understand that that has been the result of combining a clear commitment to the goals of equality and fairness at work and working to build a consensus wherever possible for each and every policy change. It is tempting, and in some ways easier, to strike out with a seemingly bold gesture and even to put it into legislation, but without broad-based support, it may not deliver the real change in practice and outcomes being sought. Legislation is only part of the process.
	A range of matters interlock the issues affecting women's pay and their ability to stay in work after the birth of children. There is no easy answer. Frankly, if there were, we would have tried it by now. As my noble friend Lady Prosser has outlined, the reality for women at work is very complex, starting, of course, with low pay. The effect of the national minimum wage was much more marked for women than for men and is probably the most crucial factor affecting women in work. It was introduced in a detailed and consensual way, save for the Conservatives opposing the idea, although I recognise and welcome their change of view. It pulled in support from employers, unions and many other groups in the Low Pay Commission. It was a detailed and long piece of work.
	The effect of the minimum wage, together with working family tax credits and childcare assistance, has made it financially possibly and sensible for many women to work, whereas previously they would have been better off on benefits and so denied the role in the workplace which they wanted. Then there were fair rights for part-time workers, introduced in 2000 after long consultation on the practicalities of the changes for employers in all sectors. The majority of those benefiting from those new rights are women.
	The right to four weeks' paid holiday was particularly important for women, who were often denied that until it became a legal right, and the more recent increase to 4.8 weeks has primarily affected low-paid women who were, in effect, being cheated by having bank holidays included in their four weeks. Again, one could argue that it was introduced more slowly than many would have wished, for understandable reasons—of course, people want speedy progress—but that legislation and the way it was done has led to a manageable change for employers and real progress for many women who are in part-time, low-paid jobs.
	The extension of maternity leave and pay and the extension of paternity rights have contributed to a change in attitudes, as well as a change in reality, to the needs of parents of young children and to the well-being of children. Each step has demanded huge negotiation and persuasion.
	I turn to an issue in the Private Member's Bill, the introduction of the right to request flexible working. That was developed through the Work and Parents Taskforce which painstakingly, and sometimes painfully, pulled together those with different views to produce a workable outcome. It agreed that the right would extend to parents with children up to the age of six and disabled children up to the age of 14. Of course, many people then and now wanted a stronger right and, of course, many employers did not want any change at all. I remember very clearly, as I am sure many noble Lords do, that when the Bill was introduced in 2003, some said it would achieve absolutely nothing. It was then extended to carers of adults. In all, that change has introduced the right to request flexible working to over 6 million parents. Many parents have exercised that right and crucially it has assisted to bring about a change in attitude in many companies. Nearly 80 per cent of women entitled to request flexibility have done so. So a measure which was both ridiculed and opposed has been a dramatic step forward.
	I turn to the specifics in the Bill. First, on the proposal to remove the upper age limit of a child for the right to request flexible working, it sounds great to go even faster and further, but the current age limit is six. The Work and Parents Taskforce, which produced the original policy of age six, argued that legislation should be linked to a significant point in a child's schooling. The recent Walsh review also thought that approach was sensible, so the next natural break after six would be 12 to cover the transition to secondary school, a major event in all children's lives, or 16 to cover GCSE year. The review recommended 16 but rejected 18. The Government have announced that they are going for the bolder move of 16. I probably would have gone for 12 and then built up support for 16, although I understand that the legal position for 12 year-olds is somewhat ambiguous. The NSPCC recommends not leaving children under 13 alone except for a short time. However, crucially the Walsh proposal has been fully consulted on, and employers' organisations think its rollout is challenging but manageable. Perhaps I am pushed towards a more measured rollout because, over the years, I have spent too many hours in too many long and detailed negotiations. If we have broad-based agreement for age 16, we should move forward on that. The CBI points out that over 90 per cent of requests are currently met, but over 20 per cent of employers feel that there has been a negative effect on productivity. Many employers are largely positive, but there is a particular challenge for small firms. The CBI opposes the extension to 18 as being likely to have a negative effect on business, but accepts and will work with the recommendations of the Walsh report.
	On equal pay, I understand the temptation to seize a simple-sounding solution. We feel somewhat desperate at times about making progress in this area, but I question the content of the Bill on it. There is a danger that the addition of the test of reasonableness could make the law unnecessarily complicated. After all, an employer already must point to a genuine, significant, material factor to explain any difference in pay for a man and a woman doing the same work or work of an equal value. I am also somewhat concerned about the proposal to have mandatory equal pay audits where a breach of equal pay is found by a court or tribunal. It is a blunt instrument. Employment tribunals can find a range of issues that need addressing, and equal pay audits, which can be expensive, time-consuming and burdensome, often will not be an answer. The threat is that that may damage the credibility of tribunals. I am uneasy about pay audits being used in this punitive manner, although we have to look at other ways to make progress on equal pay, and I recognise that at times they have been found helpful. I strongly believe that secrecy clauses must be banned in the workplace, and I hope that will be addressed properly in the Government's forthcoming equality legislation.
	Finally, I confess that I am a bit puzzled about why the Bill is being introduced now. Most of the measures I outlined earlier were opposed by the Opposition. I shall not bore the House with the many prize quotes from the Opposition in another place outlining why most of these policies were crazy and/or dangerous. Indeed, David Cameron voted against the introduction of the right to request flexible working for parents with children up to the age of six, so this is something of a Damascene conversion on his part. If there is a genuine change of heart, that is to be welcomed, but rather than propose measures in a way that, frankly, could be described as gestures, why not approach this agenda in a genuinely collaborative way? All the crucial measures introduced since 1997 have been done by forging sensible alliances to introduce practical, progressive moves forward and, especially, changes in culture. I strongly recommend this approach to the noble Baroness, who I know is seeking the changes in the workplace that we all want.

Lord Lester of Herne Hill: My Lords, we are all grateful to the noble Baroness, Lady Morris of Bolton, for introducing the Bill and we share her aims. I am sorry to say that there are some fundamental flaws in the Bill, which I shall explain later, but we hope it will act as a spur to a new, reforming equality Bill to be introduced by the Government. The debate has been greatly enriched by well informed, powerful contributions by Members of the House of both sexes with great experience, to whom I pay tribute. If I do not refer to all their speeches, it is simply because of the time factor.
	We all agree that the principle of equal pay between men and women must at last be achieved in this country to avoid women being exploited as a source of cheap labour. We need to use the skill and talent of the entire workforce, including women and men who combine motherhood or fatherhood and childrearing with paid work. Those are the values underpinning the Bill. Barbara Castle's Equal Pay Act was unsatisfactory from its birth. As the noble Baroness, Lady Prosser, said, it was a busted flush, and there is a need for root-and-branch reform. When I helped Roy Jenkins to create the Sex Discrimination Act 1975, we were not allowed to strengthen the Equal Pay Act because a deal had been done between employers and trade unions by which Harold Wilson's Government regarded themselves bound.
	Although the noble Baroness, Lady Thatcher, made her maiden speech on equal pay, her Government did nothing at all until they were obliged by the European Court of Justice to provide for equal pay for work of equal value. The regulations that were introduced in the Commons by a drunken Alan Clark were strongly criticised by the Equal Opportunities Commission, on my legal advice, as being incompatible with European Community law. The noble Baroness, Lady Howe, will remember that when the regulations were debated in this House, the noble Lord, Lord McCarthy, remarkably moved an amendment declaring,
	"that this House believes that the regulations do not adequately reflect the 1982 decision of the European Court of Justice and Article 1 of the EEC Equal Pay Directive of 1975".—[Official Report, 5/12/83; col. 886.]
	Apart from the Conservative Minister—I say Conservative so that we will remember who was on which side—no one spoke in support of the regulations, and the amendment was carried against the Government by four votes.
	Lord Denning, who decided key cases on equal pay in the Court of Appeal, referred to Barbara Castle's Act as "deplorable" because:
	"Its tortuosity and complexity is beyond compare".—[Official Report, 5/12/83; col. 901.]
	He pointed out that the regulations were not clear, intelligible or capable of being understood by ordinary people and ordinary tribunals. Since then, no Government have introduced legislation that would provide effective remedies for sex discrimination in pay.
	I was instructed by the noble Baroness, Lady Kingsmill, and others in the speech therapists' case. It took 11 years for a group of speech therapists to compare their work and pay with those of hospital pharmacists and clinical psychologists. By the time the case was finally decided, all the documents had been lost, the women and men concerned had died, retired or changed their work, and the remedies that were awarded were of no practical value. The poor old union had had to accumulate thousands of individual claim forms because the procedure is ludicrous and it is not possible to make a collective claim on behalf of a group of people. It was indeed a busted flush.
	Women still earn significantly less than men; they face substantial penalties for doing part-time work, for taking time out of the labour market and for reducing their hours to care for relatives. As the noble Baroness, Lady Morris, noted, men are paid 17.1 per cent more than women for full-time work. The pay gap is even wider in the private sector, at 21.7 per cent. The disparity in part-time wages is 36.6 per cent and, to answer the question asked by the noble Baroness, Lady Howe, Britain has been placed 81st in the world on progress on equal pay for equal work.
	Women's educational attainment is higher than that of men, but that success is not properly reflected in their pay. We are squandering women's skills and talents, resulting in the inefficient use of human capital at a time of severe economic crisis. As the noble Baroness, Lady Morris, pointed out, the gender pay gap actually increased last year.
	I have great admiration for the Minister. Indeed, I have wanted for some time to talk to her about all this. I hope that she does not share the lukewarm approach to reform of equal pay taken by some of her colleagues and advisers. The Government have not yet shown signs of recognising that the Equality Bill must replace the 1970 Act with equal pay provisions that work in practice. So far, there has been a minimalist approach; they wrongly believe that that is in the interests of business enterprise. That is profoundly mistaken. Equal treatment without discrimination furthers the aims of business enterprise by tackling unfairness and inefficiency in the marketplace.
	Clause 1 of the Bill would amend the employer's defence under Section 1(3) of the Equal Pay Act by making it a defence to an equal pay claim that a pay difference between a man and a woman is,
	"objectively justified as reasonable".
	Under Section 1(3), read in isolation from European law, where employers seek to explain the difference in pay between a man and a woman who are doing like work, equivalent work or work of equal value, they must show that the difference in pay is genuinely due to a factor that is not the difference of sex and that the factor is material—that is, significant and relevant. An employer cannot explain the difference by relying on a factor that is directly discriminatory, in that women are treated less favourably than men. Under the present law, employers are not permitted to argue that a directly discriminatory factor is objectively justified.
	If the difference in pay is indirectly discriminatory, because it has an adverse disparate impact on workers of one sex, it cannot be relied on by the employer unless it is objectively justified. That means under European law that it must be shown to be appropriate and necessary in accordance with the well known European principle of proportionality. In other words, the employer must show, because of European law, that the means employed are proportionate to the employer's aim.
	Clause 1(2) is fundamentally flawed for at least three main reasons. If the Minister disagrees with me, I hope that she will explain why. First, it would in some circumstances place an increased burden on employers, because they would be required to satisfy the test of reasonableness even in relation to factors that are not discriminatory. Ironically, that would add to the employer's burden quite unnecessarily. Secondly, it suggests that factors that are directly discriminatory would become open to justification as being reasonable, yet it is quite clear that under EC directives and as a fundamental tenet of our domestic discrimination law, you cannot justify direct discrimination. Thirdly, and perhaps most importantly, it would substitute a weaker test of "reasonableness" for that of objective justification in cases of indirect discrimination. As the noble Baroness, Lady Prosser, and others have said, that would clearly be incompatible with Article 141 of the treaty and the equal pay directive.
	In other words, Clause 1(2) would not simplify and it would undermine the effective enjoyment of equal pay for equal work. Therefore, I agree with the noble Baroness, Lady Gould of Potternewton.
	Clause 1(3) proposes that, where employers are found to have breached the Equal Pay Act, they should be required to conduct and publish a pay audit. I agree with the noble Baroness, Lady Prosser, that that would not be of any great practical value. The case for mandatory equal pay audits recommended in the Hepple report and included in my Equality Bill has, I hope, been made out, provided that it is applied in a flexible and sensible way and only to large and medium-sized employers, and provided, as the noble Baroness, Lady Gould—I think—said, there are transitional measures to allow employers and the trade unions in good faith to move towards equal pay, where the audit discloses problems that need to be dealt with in an orderly way.
	The current law's reliance on individuals bringing equal pay claims to bring about widespread equal pay has not succeeded in achieving its objective, as several noble Lords have pointed out. Not only does the system fail to bring about equal pay, it clogs up the tribunal system with hundreds, perhaps thousands, of women lodging complaints about the same employer and the same set of facts, as in the speech therapists' case. Pay systems are just that: they are systemic. Only a comprehensive pay review based on an audit of the entire pay system will bring about the necessary change.
	I remember, in one of the early equal pay cases in the House of Lords, one of the Law Lords saying to employers that that case should warn employers to look at their pay systems properly, identify where there are clusters of women in particular parts of the sector and make sure that they eliminate direct and indirect discrimination in pay. That has not happened and, because of that, local government employers, for example, have accumulated vast liabilities for damages, which now put them at serious risk of not being able to do their other jobs properly. The use of the audit is so that the employer knows what is happening and can take remedial steps rather than accumulating vast liabilities. It also keeps the lawyers away, one hopes.
	The voluntary approach to equal pay reviews has had little impact during the 38 years since the Equal Pay Act was enacted. A survey published last year by the Equality and Human Rights Commission found that only 23 per cent of private sector organisations had completed or were planning an equal pay review, compared with 43 per cent in the public sector. Successful equal pay claims are notoriously difficult to bring and require employer and employee to go through a tortuous and lengthy procedure. Requiring only those employers who have lost in an employment tribunal to undertake an equal pay audit is punitive and is not an effective means of bringing about the necessary change, as several noble Lords have pointed out.
	Press reports suggest that the Government are now proposing to require public sector employers to publish the gender pay gap within their organisations; that is, to compare the average pay of men and the average pay of women. I hope that that is incorrect—it seems to me to be dotty; it would be a crude measure and of little practical value to address the underlying problems of the pay gap. In the first place, it would not reveal the causes of pay discrepancies between comparable groups of male and female workers. With access only to those crude figures, employees would remain in the dark about whether the pay gap is caused by undervaluing female-dominated jobs, a glass ceiling that prevents career progression for women or overt discrimination. Moreover, any such measure that excluded large and medium-sized firms in the private sector, in which the vast majority of people are employed, would not be a serious attempt to address the pay gap. I hope that that rumour is incorrect.
	Like all other noble Lords who have spoken, including the right reverend Prelate the Bishop of Southwark, who made a powerful speech, we strongly support the principle of flexible working for the reasons expressed by, in particular, the noble Baroness, Lady Morgan of Huyton. She made me think about whether we need to consider age limits much more carefully. I therefore cannot say that we give unequivocal support to this proposal, although we obviously support the principle of flexible pay.
	We look forward to learning from the Minister the Government's views of the Bill and whether she is authorised to tell us what the Government think is the best way forward to secure equal pay and eliminate sex discrimination in the workplace. The noble Baroness, Lady Vadera, has been unfairly attacked for observing green shoots in the economy; I hope that she will be able to share her vision of springtime in Whitehall in this important area.

Lord Hunt of Wirral: My Lords, I begin by declaring the interests shown in the Register.
	I rise enthusiastically to support this Bill. I am delighted to do so from the opposition Front Bench. My colleagues and I want to see such legislation on the statute book as soon as possible. I congratulate my noble friend on introducing this measure, which seeks to strengthen existing equal pay legislation—to give it more teeth in the face of continuing unfair treatment. My noble friend has a remarkably impressive record of taking up the issues of equal pay for working women as a Member of this House, in her political career outside this place and as a working woman and mother.
	I was very pleased when my friend and colleague, Theresa May, launched her campaign for equal pay for women. We have had a very important debate. Many constructive points have been raised and must now be carefully considered. I strongly support the bid to obtain cross-party support for such a measure. I was delighted to hear from the noble Lord, Lord Morris of Handsworth, a rather impressive social and economic case for supporting the Bill. I reflected that when I was invited to the TUC summer reception, several of our colleagues in the trade union movement were getting very concerned about the legal side to this and the way in which it was becoming a bit of a paradise for lawyers. But we are now reassured by the noble Lord, Lord Lester of Herne Hill, that we are going to keep lawyers away. We look forward to his assistance in ensuring that that happens.
	There were a number of concerns about the detailed provisions of the Bill. Three successive speakers, the noble Baronesses, Lady Gould, Lady Prosser and Lady Morgan of Huyton, raised some important points. Although I disagree with some of the perhaps political elements of what they said, we should carefully reflect on a number of those concerns about detailed provisions. Perhaps I may say that the noble Lord, Lord Lester of Herne Hill, painted a rather partisan picture of the past. However, it is important that I should remind the House that when I was Secretary of State for employment, I said:
	"Discrimination against women is not only inefficient, it is clearly wrong".—[Official Report, Commons, 10/3/94; col. 434.]
	I believe that so strongly. Equality of opportunity is a vital principle, so is equality of treatment and remuneration. Whether one terms it as equality, diversity or just fair play, women must be given every opportunity to fulfil their potential. The points raised by the noble Baronesses, Lady Prosser and Lady Gould, about upskilling and ensuring that our education and training process gives an equal opportunity to women were so important.
	The words "fair play" are the English translation of the title of the "chwarae teg" programme I introduced when I was Secretary of State for Wales, in combination—I reflect on the presence of the noble Baroness, Lady Howe of Idlicote—with Opportunity 2000 and the Equal Opportunities Commission. I strongly agree, as I agreed then with the noble Baroness, that progress seems to be appallingly slow. We have to do something about that.
	Fifteen years ago, I was able to point to both real and relative growth in the hourly rate for the female working population. Over the previous 15 years, it had risen by 55.9 per cent, as compared with 40.4 per cent for the male population. But we have seen too little progress in the right direction since. As several noble Lords reminded us, men still get paid more than 17 per cent more than women, meaning that over an average working life a woman will lose or forego a massive £300,000. This pay gap exists not only in low-paid, part-time jobs: women working in full-time jobs also earn less than men, as was also pointed out.
	I was concerned when I read that, recently, Catherine Rake, director of the Fawcett Society, the women's campaign group, said:
	"After years of painfully slow progress in closing the pay gap, we have now actually gone into reverse gear, with the pay gap widening for women working full and part-time".
	These are worrying facts and we have to reflect on how we will overcome them. It is important that we should tackle the pay gap not only by passing a law, but also by raising awareness, particularly among young people.
	Some important points have been made about flexible working.

Lord Lester of Herne Hill: My Lords, perhaps I may make clear that I am not politically partisan on this issue and that I fully recognise that previous Conservative Governments have been as derelict as the present Labour Government in not tackling this issue. In the past, there have been green shoots; for example, in Northern Ireland a progressive law was introduced in Margaret Thatcher's time and the noble Lord's record is also notable. I said nothing to suggest that the Liberal Democrats are superior on any of these questions. As the appointment in 1976 of the noble Baronesses, Lady Howe and Lady Lockwood, as chair and deputy-chair of the EOC indicated, it is vital that we are cross-party on these issues. I hope that that is clear.

Lord Hunt of Wirral: My Lords, I agree with the last words of the noble Lord and I hope that the whole debate has reflected a cross-party and non-partisan approach. However, I felt that I had to put the record straight, and indeed I welcome the opportunity to do so.
	I note the comments of the right reverend Prelate the Bishop of Southwark on flexible working, which were absolutely on the ball. Flexible working can make a huge difference to family well-being. As the noble Baroness, Lady Gould of Potternewton, reminded us, individual performance improves when there is flexibility in the working environment. However, I fear that many UK businesses will struggle to survive the next 12 to 18 difficult months. There will be other occasions on which we can discuss why that has happened and what needs to happen now. I have listened carefully to the concerns of the CBI and British Chambers of Commerce and was pleased to note in the CBI's briefing on the Bill a reminder of its view that discrimination is inexcusable. Although both organisations have concerns about the detailed provisions, they support flexible working practices and recognise that they can be particularly useful to businesses during a downturn.
	As we proceed to the Committee stage, we must reflect on how this legislation can be improved. However, as businesses struggle to survive, in my view they will greatly enhance their chances of success if they truly embrace fairness, allowing each and every individual to realise his or her full potential and then receiving full and fair recompense in return. I support the Bill.

Baroness Vadera: My Lords, I join other noble Lords in thanking the noble Baroness, Lady Morris, for giving us the opportunity to discuss the issues addressed in this Bill, and for her passion for and the contribution she makes to this area. From the Government's perspective, we believe that the House ought to consider some of the points in the Bill. It proposes two changes to the Equal Pay Act 1970, but as other noble Lords have remarked, these proposals come before us just as the Government are preparing their own equality Bill to bring together all existing equality legislation, including equal pay. That Bill was promised in our manifesto and included in the Queen's Speech as a sign of our commitment to these issues. We will be bringing it forward as soon as practicable. We are of course grateful to the noble Lord, Lord Lester, for his work on our Bill and I can assure the noble Lord of our enthusiasm for equal pay not just as an issue of social justice, but in terms of economic productivity.

Lord Hunt of Wirral: My Lords, in welcoming the noble Baroness's reply to this debate, it would help if she were able to offer a little more clarity on when the equality Bill is to be introduced.

Baroness Vadera: My Lords, we believe that the Bill will be published in the spring. When further details became available, I shall write to the noble Lord. We are carefully considering how the law on equal pay will be framed in the new legislation. This will include the grounds on which differences in pay for equal work can be justified, a subject also addressed by the noble Baroness's Bill. Under existing law, for a difference in pay between a man and a woman doing the same work or work of equal value to be justifiable, the employer must be able to point to a genuine material factor that is unrelated to gender. As has been said, London weighting is such a material factor, and must be both significant and related to the difference between the contractual terms of the female and the male comparator. The employer therefore has to show that this is the reason for the disparity in pay. I therefore wholeheartedly agree with the three reasons sharply articulated by the noble Lord, Lord Lester, as to why adding a reasonableness element to this test would not be helpful. It would potentially require an employer to be ready to objectively justify as reasonable any reason for a difference in pay between a man and a woman doing equal work even where the reason for it is not discriminatory, whereas at the moment it is only necessary to do so where the fact in question is tainted by indirect discrimination. This could increase the number of potential claims and the burdens on business, and could lead to extra, unnecessary complexity without adding to the protection provided to women.
	In our Bill, we intend to clarify the way in which the current law works. I cannot better the compelling arguments made by my noble friends Lady Gould and Lady Prosser, based on their lifetime experience in this area, about the unintended consequences in relation to this and the second element in the Bill which requires that when there is a breach of an equal pay requirement an employment tribunal should be required to order an equal pay audit. Under this proposal employers would be required to carry out an equal pay audit even if they have recently undertaken one or if the case does not have implications for the majority of employees in the organisation. The impact of this proposal would therefore be disproportionate in most cases.
	A study carried out for the Equal Opportunities Commission in 2005 found that a typical audit in the private sector cost the equivalent of three to six-months' of a full-time member's staff time. Nor would it have a significant impact on the gender pay gap. It would have applied to only 125 equal pay cases in 2006-07, the latest year for which figures are available. This equates to only 2 per cent of the total number of equal pay cases in that period.
	In preparing our equality Bill, the Government have carefully considered the case for all employers to carry out mandatory equal pay audits. We have concluded that while equal pay audits can be useful as a way of exploring unfair pay practices in some circumstances, they can also be expensive, time-consuming and burdensome. The purpose of the Government's equality Bill is therefore focused on preventing discrimination and closing the gender pay gap, not just closing the stable door after the horse has bolted. I agree with the insightful analysis of my noble friend Lady Morgan that not all elements of this problem can be legislated for.
	The Government's equality Bill will therefore increase transparency by banning secrecy clauses that prevent people discussing their own pay; by ensuring that public bodies report on equality issues, which will enable targeted and effective action; and by extending the scope for positive action, which will give employers a chance to make their workforce more diverse when choosing between two equally suitable candidates.
	Our Bill will strengthen the law in a way that will have a real impact on the gender pay gap without imposing unnecessary burdens on business. We therefore look forward to the support for the Bill of the noble Lord, Lord Hunt, in the light of the comments he has made.

Lord Lester of Herne Hill: My Lords, will the Minister reflect afterwards on the value of equal pay audits of a non-heavy and non-bureaucratic kind as a preventive measure in order that employers will understand the problems they have and take remedial measures in advance? She has presented it so far on the basis of what the Opposition have put forward, but there is a preventive way of doing it which is much better than measures leading to law suits. Will she reflect on that?

Baroness Vadera: My Lords, noble Lords will be aware that discussions are ongoing. I am sure that the noble Lord will not only be consulted but will have the chance to debate this issue during the course of the Bill.
	We are proud of our record on family-friendly policies and the flexible working policy, which is founded on careful evaluation and thorough consultation. It balances the needs of employees and employers; it contains the right to request, not the right to have, but with the employer having the obligation to consider all requests seriously. Evidence suggests that they do so: 91 per cent of all requests are accepted, and 95 per cent of workplaces say that at least one flexible-working arrangement is available to employees. Some 56 per cent of employees say they have worked flexibly in the past 12 months.
	Businesses recognise the benefits that flexible working can bring. The Institute of Directors said in its 2008 report that all the measured impacts of flexible working were deemed positive, including productivity, profitability, customer service, recruitment, retention, absenteeism, overhead costs, morale, teamworking and knowledge sharing. Working with business on our flexible working policy has underpinned our success so far, and noble Lords have commented on the CBI's position in that regard.
	The noble Baroness asked about the number of fathers requesting flexible working. I am pleased to say that it has broadly doubled. The figures are available and we would be happy to provide them.
	We will continue to work closely with employers as we embark on this next phase. As my noble friend Lady Morgan has explained, we had a review last year by Imelda Walsh, the HR director of Tesco, who considered evidence from a wide range of sources including interviews with business organisations, unions and family groups.

Baroness Prosser: My Lords, I am sorry to interrupt but, just as a matter of record, Imelda Walsh is the HR director of Sainsbury's.

Baroness Vadera: My Lords, I apologise for getting my retailers mixed up. I am glad to be corrected on that point because I am sure she would not have been happy.
	The review was well received after full consultation and it concluded that extending the right to request to parents of children up to the age of 16 would allow them to support their children through their GCSEs. It stressed the growing importance of exams and highlighted that some parents will want to work more flexibly, on either a permanent or a temporary basis, to help their children prepare for them.
	Imelda Walsh rejected a smaller extension to the age of 12 because of the importance of enabling parents to support their children through their early teenage years. She also rejected a wider increase to 18; representations to the review suggested that parental need for flexible working at this time is weaker. She recognised that young adults aged 16 to 18 can be expected to take greater personal responsibility than younger teenagers, whether in education, training or a first job.
	She highlighted that the increase to 16 would be sizeable and the single biggest increase in the number of employees entitled to the right to request, from over 6 million now to over 10 million from April. Furthermore, official data show that the labour outcomes for mothers aged 16 and under in particular can be compromised by trying to balance their work/life commitments. Female employment rates rise steadily by age of youngest child. By 15 they are still only around 50 per cent, but when the youngest child reaches 17 almost 70 per cent of mothers are at work. It is therefore right that we focus on parents of children up to the age of 16 where there is a real need to be met.
	I recognise that some wish us to go further than that amount, but I hope the noble Baroness will recognise the representations that have been made from all sides. There are also others who would prefer us to delay. The Government have carefully considered all the arguments but continue to believe that the extension to 16 balances parental need with business requirements and is a fair outcome for both parties.
	We have recently consulted on how to implement the extension and our response is due to be published shortly. The extension to flexible working will be introduced from April 2009, and an extra 4.5 million parents in Britain will gain new rights to request flexible working. This is a significant achievement and, we believe, the right way forward. The noble Baroness, Lady Morris, will no doubt recognise that there are some serious considerations of elements of her Bill but that we have to take a balanced view.
	We look forward to building cross-party support for our equality Bill. I am very proud of this Government's achievements. We are a party with three times as many female MPs as all the rest put together. We have introduced longer maternity leave, paid paternity leave, the right to flexible working and other measures, including the national minimum wage and tax credits, that make a huge difference to the lives of millions of women. Those measures have been opposed by the Opposition.
	I assure the House that we will show the report of the debate to all the relevant Ministers across government. I shall also ensure that relevant officials follow the progress of the Bill through the House.

Baroness Morris of Bolton: My Lords, I am most grateful to everybody for taking part. It has been a wonderful debate and I look forward to reading all your Lordships' contributions in Hansard, because they merit it. I thank the Minister for her comments. I, too, applaud, all that the Government have done for women and for families—I think that we can now take that as a given. I thank her also for alerting us to the fact that the equality Bill will be published in the spring. We had been led to believe that it would not be before the summer, so it is welcome that we will see it sooner rather than later. I look forward to working alongside my noble friend Lady Warsi on it.
	The Minister went into great detail, for which I am most grateful. As this is a complex area, as many noble Lords have said, I look forward to reading exactly what she said. Although we may not agree on the detail of my Bill, I found myself agreeing with much of what the Minister said.
	I thank my noble friend Lord Hunt of Wirral for his fulsome support for the Bill. I am grateful to him for pointing out that equal pay and fairness have long been part of the lexicon of the Conservative Party, even though there seems to be collective amnesia in some areas. However, I agree with the noble Lord, Lord Lester, that these issues should not be partisan.
	I thank the noble Lord, Lord Lester, for his support for the aims of the Bill and take on board his comments about it being fundamentally flawed—although I am not quite sure how he accommodates both those sentiments so well. I am not a lawyer; I am simply married to one, although he had nothing whatever to do with the Bill—being a judge, he has to be very much above party politics. I look forward to the assistance of the noble Lord, Lord Lester, in later stages, especially with regard to light-touch audits. That is an interesting area that we could explore.
	On reasonableness, I can say only that various lawyers have helped on the drafting, which I am told is used in countless legal situations and arguments, including the Unfair Contract Terms Act 1977 and other parts of employment law. I would be most grateful if the noble Lord, Lord Lester, did not intervene on those points, because I would not have an answer to give him, but I am told that reasonableness is expected there.
	I take on board the point made by the noble Lord, Lord Morris of Handsworth, however, that the test of reasonableness could be a lawyers' paradise, although I do not think it would be half as much a legal paradise as the proposals to place a burden on employers regarding social mobility will be. My proposals will encourage future parents, because they will enable parents to be in work that they can afford to do.
	When the noble Lord, Lord Morris, said that he agreed with everything, I thought of how, in these difficult times, people sometimes seem to be on different sides of the argument. We had a wonderful supper together the other night, when as a good Tory I bemoaned the fact that I banked with the RBS, which is now almost entirely owned by the Government, and that my mortgage is with the Britannia, which has now merged with the Co-operative society. The noble Lord, Lord Morris, said that for all his life he had been campaigning for a mixed economy, but he never thought that it would be the banks that were legalised and the Post Office that was privatised. It just goes to show that, in these times, arguments really are all over the place.
	I congratulate the noble Baroness, Lady Prosser, on the tremendous work that she undertook with the Women and Work Commission, culminating in the excellent report, Shaping a Fairer Future. It is a brilliant document and I recommend it to anyone who has not read it. I agree with her that flexibility is welcomed by many employers; small companies are the original flexible employers. Often they are ahead of legislation. My parents had a small cake shop in Farnworth where they employed eight people and, if they had not operated flexible working practices, they simply would not have had a business. I agree, too, on enhancing the skills of women. I shall read again with care her views on the Equal Pay Act possibly needing to be ripped up and started again.
	The noble Baroness, Lady Gould of Potternewton, had reservations about the details of the Bill but no reservations regarding the principles, and I thank her for that. Along with the noble Baronesses, Lady Prosser and Lady Morgan of Huyton, she mentioned the Walsh review, which we will welcome as a step in the right direction. Anyone with a child of 17 or 18 knows that they have their own needs. In today's world, strengthening and supporting families should be one of our key concerns. I remind your Lordships that the Government are introducing a duty on young people of 17 or 18 to stay in education or training. They are still legally regarded as children until the age of 18.
	I agree with the noble Baroness, Lady Morgan of Huyton, that legislation is only part of the process and that the issue of women at work is complex, but at least this Bill is an attempt to address it. The majority of women's groups that we spoke to thought that the way in the Bill was the best way forward. The noble Baroness had a catalogue of why maybe in the past we had not agreed with things—but we need to work on this in a collaborative way, which is exactly what I am trying to do. I rather liked the idea of a redhead from Bolton following in the footsteps of a redhead from Blackburn.
	I am most grateful to the noble Baroness, Lady Howe of Idlicote, with her vast experience in this area, who said that the Bill may not be perfect—and I am getting that message loud and clear now—but it does try to address the issues. It has found genuine support in its aims around your Lordships' House. Again, I agree with her that women's potential remains so underdeveloped.
	I thank the right reverend Prelate the Bishop of Southwark for taking part and for mentioning the right reverend Prelate the Bishop of Nottingham and Southwell, with whom I have enjoyed debating the issue of flexible working on numerous occasions. The remarks of the right reverend Prelate about benefit families bring up one of my main concerns in this area.
	The pay gap is a silent but far reaching problem. As the CBI said, discrimination is inexcusable. I leave noble Lords with a simple request—to think about the issues that I have raised here today and which I hope this Bill goes some way to addressing, beyond the confines of party allegiance. These are pressing concerns which affect countless women in the country. Rather than wait for a big government Bill to go through—although I look forward to it—with all the delays that Bills and false starts may entail, in this Bill we have an opportunity to make changes that will strengthen our families and promote fairness.
	Bill read a second time and committed to a Committee of the Whole House.

House adjourned at 1.29 pm.